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oR,
ON • METHODIC•L pLAN
•PROJECTED
BY SAMUELTAYLORCOLERIDGE.
POLITICAL ECONOMY.
POLITICAL ECONOMY.
BY
_ASSAUWILLIAMSENIOR,ESQ.,
L_TE -PROFE_O_ OY POLITICAL ECONOMY IN THE US_/%'EESITY OF OXFORD.
TII1RD ED1TIO.N.
• LL' _
V_ "
ISNDO__ AND GLASGOV?:
• . 185,_!-.
GLASGOW:
C_
"° ' •
• °
-"i." _
CONT EN TS.
PA@E
POLITICAL ECONOMY DEFINED AS, THE SCIENCE WHICH TREATS OS_ THE
NATURE D THE PRODUCTION, AND THE DISTRIBUTION OF WF, ALTH, l
NATURE OF WEALTH.
Development
Desire of Wealth,
of the First Elementary Proposition, namely, the General Pac_
• " " " . _7
Development
which Limit of the Second Elementary Proposition, namely, the Causes
Population,
• " " " • 30
Development of the Third Elementary Proposition, namely, '
Production defined as the occasioning an alteration in the condition
existing particles of matter, for the oceasionin o wh" of the
the thin s the " " • 9 f zchalteration or for
alteration
g is anee
Product,
resu/tzng,. sometlang may be obtained in _xehauge' This
Products divided into Services anal Commodities." A Service is the act o'f 50
as altered, the above mentiond alteration.
occasioning A Commodity is the thing
Con,umption
defin&usthe"_king'.se
ofa th,;,g." : : • 51
Producible Consumpttbn defined as that use of a'produet which occa_ons an 53
uIterior product. Unproductive Consumotion as that use which occasions
no ulterior product,
I/qSTRUMENTS .
OFPRODUCTION 1__. ._ . . . . 54
Primary: 1. Labour: 2. Natural Agents:_
(.D 1. Za_r defined as the voluntary exertion of bodil_ or " .• 57
l ftr thepurpose of Production, . . _ mental faculties
2. atura! Agents defined as those t_roductive A-e_ , ." • 57
derive thew powers frmn man, _ .ots wh_ch do not
Seconda_. : Abstinence. 58
DISTRIBUTION OF WEALTH.
Costofto_roduc_'on
gary Production,he_ned'_
. theA,,,,
of d__M,,. and Abstinence
". • ne_ 95
Divided into Cost of Production on the t_art of ihe _r_ucer, aud Cost 97
of Production on the part of the Consumer, . . . .
These are the same, unless the Production he subject to a Mono_oly_ 103
101
CONTENTS. vii
rAGE
INTRODUCTION.'
value ''_ or, "the Science of Values;" adds, that "its object is to
point out the means by which the industry of man may be rendered
most productive of wealth, to ascertain the circumstances most favour-
able to its accumulation, the proportions in which it is divided, and
the mode in which it may be most advantageously consumed.";
l, imlt_ afthe _cience.--It iS impossible to overstate the importance
of these inquiries, and it is not easy to state their extent. _ They
involve, as their general premises, the consideration of the whole
theory of morals of government, and of civil and criminal legislation;
and, for their particular premises, a knowledge of all the facts which
affect the social condition of every community whoso conduct the
Economist proposes to influence. We believe that such inquiries far
exceed the bounds of any single Treatise, and indeed the powers of
any single mind. We believe that by confining our own and the
reader's attention to the Nature, Production, and Distribution of
Wealth, we shall produce a more clear, and complete, and instructive
work than if we allowed ourselves to wander into the more interesting
and more important, but far less definite, fields by which the com-
paratively narrow path of Political Economy is surrounded. The
questions, To what extent and under what circumstances the possession
of Wealth is, on the whole, beneficial or injurious to its possessor, or
to the society of which he is a member? What distribution of Wealth
is most desirable in each different state of society? and What are the
means by which any given Country can facilitate such a distribution?
--all these are questions of great interest and difficulty, but no more
form part of the Science of Political Economy, in the sense in which
we use that term, than Navigation forms part of the Science of
Astronomy. The principles supplied by Political Economy are indeed
necessary elements in their solution, but they are not the ofily, or
even the most important elements. The writer who pursues such
investigations is in fact engaged on the great Science of legislation;
a Science which requires a knowledge of the general principles sup-
plied by Political Economy, but differs from it essentially in its subject,
its premises, and its conclusions. Tim subject of legislation is not
Wealth, but human Welfare. Its premises are drawn from an infinite
variety of phenomena, supported by evidence of every degree of
strength, and authorizing conclusions deserving every degree of assent,
from perfect confidence to bare suspicion. And its expounder is
enabled, and even required, not merely to state general facts, but to
urge the adoption or rejection of actual measures or trains of action.
On the other hand, the subject treated by the Political Economist,
using that term in the limited sense in which we apply it, is not Hap-
piness, but Wealth; his premises consist of a very few general proposi-
tions, the result of observation, or consciousness, and scarcely requiring
6 Principles,&e.p. 1. _ Ibid. p. 8.
INTRODUCTION. 3
writer and of the reader, they are often associated with ideas which
are intended to be excluded, or separated from ideas which are meant
to be comprehended. Thus, in ordinary language, the word Capital
is sometimes used as comprehending every species of Wealth, and
sometimes as confined to Money.
If Economists had been aware that the Science depends more on
reasoning than on observation, and that its principal difficulty consists
not in the ascertainment of its facts, but in the use of its terms, we
cannot doubt that their principal efforts would have been directed to
the selection and consistent use of an accurate nomenclature. So far
is this from having been the case, that it is only within a very short
period that serious attention has been given to its nomenclature. The
Wealth o/Nations contains scarcely a definition: most of the modern
French writers, and some indeed of our own, have not only neglected
definitions, but have expressly reprobated their use; and the English
Work which has attracted the most attention during the present
century, Mr. Ricardo's Principles of Political Economy, is deformed
by a use of words so unexplained, and yet so remote from ordinary
usage, and from that of other writers on the same subject, and fre-
quently so inconsistent, as to perplex every reader, and not unfre-
quently to have misled the eminent writer himself. We do not
complain of all his innovations in language: such innovations are, for
scientific purposes, fi-equently indispensable, and we shall be forced to
make many ourselves. What we do complain of is, that his innova-
tions, such, for instance, as the substitution of the word Value for
Cost, are frequently unnecessary, and are almost always made without
any warning to his readers; and that the same words, such, for
example, as the adjectives high and low, when applied to wages, are
used by him sometimes in their popular sense, as expressing an
amount, and sometimes in a technical sense of his own, as expressing
a proportion.
Our object in these remarks has been not only to account for the
slow progress which has as yet been made by Pohtieal Economy, and
to suggest means by which its advancement may be accelerated, but
also to warn the reader of the nature of the following Treatise. He
will find it consist, in a great degree, of discussions as to the most
convenient use of a few familiar words. Such discussions it is im-
possible to render amusing, but we trust that they will be useful, by
directing his attention to the great difficulties of the Science, though
he may often disapprove our classification or nomenclature.
NATURE OF WEALTH.
but the purity of their air ? Rivers and the sea are equally unfortu-
nate illustrations. Many of the rivers of England are not less strictly
appropriated, and are f'ar greater sources of wealth, than any equal
superficies of land. When M. Say visited Lancashire, he must have
found every inch of fall in every stream the subject of lease aud pur-
chase. And so far are the services of the sea from being incapable of
appropriation, that, during the late war, £60,000 was sometimes paid
for a license to make use of it for a single voyage; and the privilege
of fishing in particular parts of it has been the subject of wars and
treaties.
The things of which the utility is imperfectly transferable may be
divided into two great classes. The first comprises all those material
objects which are affected by the peculiar mental associations, or
adapted to the peculiar wants, of individuals. A mansion may flatter
the pride of its owner as having been the residence of his ancestors,
or he endeared to him as the scene of his childhood; or he may have
built it in a form which pleases no eye, or laid it out in apartments
that suit no habits but his own. Still his substantial powers of afford-
ing warmth and shelter will obtain him purchasers or tenants, though
they may demand a reduction from the price in consequence of those
very qualities which, with him, formed its principal merits. The
palace of St. James's is full of comfort and convenience, and would
supply a man of large fortune with an excellent residence; but the
long suite of apartments within apartments, which is admirably adapted
to holding a Court, would be a mere incumbrance to any but a royal
personage. Any individual might hire Alnwiek or Blenheim, and
enjoy their mere beauty and magnificence, perhaps, more thml their
owners who have been long familiarized to them; but he could never
feel the peculiar pleasure whieh they seem fitted to give to a Percy
and a Churehhill. There are many things, such as clothes and furni-
ture, which sink in utility in the estimation of every one but their
purchaser, from the mere fact of having changed hands. A hat or a
table which has been just sent home does not appear to the purchaser
less useful than when he saw it in the shop; but if he attempt to resell
either, he will find that with the rest of the world it has sunk into the
degraded rank of second-hand.
The second class of things imperfectly transferable includes the
greater part, perhaps all, of our p_.rsonal qualities. This classification,
wla:mhplaces talents and accomplishments among the articles of wealth,
may appear at first sight strange and inconvenient; it certainly is
d_t from that of most Economists. We will therefore venture to
ill_trate it more fully.
Health, strength, and knowledge, and the other natural and
acquired powers of body and mind, appear to us to be articles of
wealth, precisely analogous to a residence having some qualities that
are universally useful, and others peculiarly adapted to the tastes of
10 NATURE OF WEALTH.
its owner. They are limited in supply, and are causes of pleasure
and preventives of pain far more effectual than the possession of
Alnwick or of Blenheim. A portion of the advantages which arise
from them are inseparably annexed to their possessor, like the asso-
ciations of an hereditary property: another portion, and often a very
large one, is as transferable as the palpable convenience of the mansion,
or beauty of the gardens. What cannot be transferred are the
temporary pleasure which generally accompanies the exercise of any
accomplishment, and the habitual satisfaction arising from the con-
sciousness of possessing it. What can be transferred are the beneficial
results which follow from its having been employed during the period
for which its services have been hired. If an Erskine or a Sugden
undertakes my cause, he transfers to me, for that occasion, the use of
all his natural and acquired ability. My defence is as well conducted
as if I had myself the knowledge and the eloquence of an accomplished
advocate. What he cannot transfer is the pleasure which he feels in
the exercise of his dexterity; but how small is his pleasure compared
to mine, if he succeeds for me] A passenger may envy the activity
and intrepidity of the crew; they cannot actually implant in h_m their
strength, or their insensibility to danger; but so far as these qualities
are means towards an end, so far as they enable him to perform his
voyage with quickness and safety, he enjoys the use of them as fully
as if they belonged to himself. A hunter probably feels somewhat
the same sort of pleasure in the chase which Erskine felt in court;
and this pleasure cannot he transferred any more than his muscles or
his lungs; but, so far as his strength, speed, and bottom are means
towards the end of enabling his rider to keep up with the hounds,
they can be purchased or hired as effectually as his bridle or saddle.
In the greater part of the world a man is as purchasable as a horse.
In such Countries the only difference in value between a slave and a
brute consists in the degree in which they respectively possess the
saleable qualities that we have been considering. If the question
whether personal qualities are articles of wealth had been proposed in
classical times, it would have appeared too clear for discussion. In
Athens, every one would have replied that they, in fact, constituted
the whole value of an _¢_xo_ _7_,_o_. The only differences in this
respect between a freeman and a slave are, first, that the freeman
sells himsdf, and only for a period, and to a certain extent: the slave
may be sold by others, and absolutely; and, secondly, that the personal
qualities of the slave are a portion of the wealth of his master; those
of the freeman, so far as they can be made the subject of exchange,
are a part of his own wealth. They perish indeed by his death, and
may be impaired or destroyed by disease, or rendered valueless by any
changes in the customs of the Country which shall destroy the demand
for his services; but, subject to these contingencies, they are wealth,
and wealth of the most valuable kind. The amount of revenue derived
NATURE OF WEALTH. ]1
from their exercise in England far exceeds the rental of all the lands
in Great Britain.
Limitation in Nupplythe morn lmlmrtnnt.--0f the three conditions of
value, utility, transferableness, and limitation in supply, the last is by
far the most important. The chief sources of its influence on value
are two of the most powerful principles of human nature, the love of
variety, and the love of distinction. The mere necessaries of life are
few and simple. Potatoes, water, and salt, simple raiment, a blanket,
a hut, an iron pot, and the materials of firing, are sufficient to support
mere animal existence in this climate: they do, in fact, support the
existence of the greater part of the inhabitants of Ireland; and in
warmer countries much less will suffice. :But no man is satisfied with
so limited a range of enjoyment. His first object is to vary his food;
but this desire, though urgent at first, is more easily satisfied than any
other, except perhaps that of dress. Our ancestors, long after they
had indulged in considerable luxury in other respects, seem to have
been contented with a very uniform though grossly abundant diet.
And even now, notwithstanding the common declamation on the
luxury of the table, we shall find that most persons, including even
those whose appetites are not controlled by frugality, confine their
principal solid food but to a few articles, and their liquids to still
fewer.
The next desire is variety of dress; a taste which has this peculi-
arity, that, though it is one of the first symptoms that a people is
emerging from the brutishness of the lowest savage life, it quickly
reaches its highest point, and, in the subsequent progress of refine-
ment, in one sex at least, diminishes until even the highest ranks
assume an almost quaker-like simplicity.
Last comes the desire to build, to ornament, and to furnish: tastes
which are absolutely insatiable where they exist, and seem to increase
with every improvement in civilization. The comforts and conveniences
which we now expect in an ordinary lodging, are mere than were
enjoyed by people of opulence a century ago: and even a century ago
a respectable tradesman would have been dissatisfied if his bed-room
had been no better furnished than that of Henry VIII., which con-
tained, we are told, only a bed, a cupboard of plate, a joint-stool, a
pair of andirons, and a small mirror. 8 And yet Henry was among the
richest and the most magnificent sovereigns of his times. Our great
grand-children perhaps will despise the accommodations of the present
Age, and their poverty may, in turn, be pitied by their successors.
It is obvious, however, that our desires do not aim so much at
wqUhiantityas at diversity. :Not only are there limits to the pleasure
eh commodities of any given class can afford, but the pleasure
dimlni_hes in a rapidly increasing ratio long before those limits are
reached. Two articles of the same kind will seldom afford twice the
pleasure of one, and still less will ten give five times the pleasure of
two. In proportion, therefore, as any article is abundant, the number
of those who are provided with it, and do not wish, or wish but little,
to increase their provision, is likely to be great; and, so far as they
are concerned, the additional supply loses all, or nearly all, its utility.
And in proportion to its scarcity the number of those who are in want
of it, and the degree in which they want it, are likely to be increased;
and its utility, or, in other words, the pleasure which the possession of
a given quantity of it will afford, increases proportionally.
But strong as is the desire for variety, it is weak compared with the
desire for distinction: a feeling which, if we consider its universality
and its constancy, that it affects all men and at all times, that it comes
with us from the cradle, and never leaves us till we go into the grave,
may be pronounced to be the most powerful of human passions.
The most obvious source of distinction is the possession of superior
wealth. It is the one which excites most the admiration of the bulk
of mankind, and the only one which they feel capable of attaining. To
seem more rich, or, to use a common expression, to keep up a better
appearance, than those within their own sphere of comparison, is, with
almost all men who are placed beyond the fear of actual want, the
ruling principle of conduct. For this object they undergo toil which
no pain or pleasure addressed to the senses would lead them to
encounter; into which no slave could be lashed or bribed. But this
object is obtained by appearances, and, indeed, cannot be attained by
anything else. All the gold in the Paetotus, even if the Pactotus
were as rich as when hlidas had just washed in it, would obviously
confer no distinction on the man who was unable to exhibit it. The
only mode by which wealth can be exhibited is, by the apparent
possession of some object of desire which is limited in sup.ply. Mere
limitation of supply, indeed, unless there be some other circumstance
constituting the article in question an object of desire, or, in other
words, giving it utility, is insufficient. This circumstance must be its
having some quality to which some person beside the owner annexes
the notion of utility. The original manuscript of every schoolboy's
exercise is as limited in supply as anything can be, but there is
nothing to make it an object of desire after it has served its purpose
in school. It is merely a blotted manuscript, unique certainly, but
valueless. But if the original manuscript of the Wealth of tVatizns
could be discovered, it would excite an interest throughout Europe.
Curiosity would be eager to trace the first workings of a mind whose
influence will be felt as long as civilized society endures. It might,
perhaps, be purchased by some ignorant collector only for the purposes
of ostentation, but it could not serve even those purposes unte_
recommended by some circumstance beyond mere singularity.
It is impossible, however, to conceive anything more trifling or
NATURE OF WEALTH. 13
two objects, and the precise relation which it denotes is the quantity
of the one which can be obtained in exchange for a given quantity of
the other. It is impossible, therefore, to predicate value of any object,
without referring, expressly or tacitly, to some other object or objects
in which its value is to be estimated; or, in other words, of which a
certain quantity can be obtained in exchange for a certain quantity of
the object in question.
We have already observed that the substance which at present is
most desired, or, in other words, possesses the highest degree of value,
is the diamond. By this we meant to express that there is no sub-
stance of which a given quantity will exchange for so large a quantity
of every other commodity. When we wished to state the value of the
king of_Persia's bracelet, we stated first the amount of gold. and after-
wards of English labour, which it would command in exchange. If we
had attempted to give a perfect account of its value, we could have
done so only by enumerating separately the quantity of every other
article of wealth which could be obtained in exchange for it. Such an
_numeration, if it could have been given, would have been a most
instructive commercial lesson, for it would have shown not only the
value of the diamond in all other commodities, but the reciprocal value
of all other commodities in one another. If we had ascertained that
a diamond weighing an ounce would exchange for one million five
hmldred thousand tons of Hepburn coal, or one hundred thousand tons
of Essex wheat, or two thousand five hundred tons of English foolscap
paper, we might have inferred tbat the coal, wheat, and paper would
mutually exchange in the same proportions in which they were
exchangeable for the diamond, and that a given weight of paper would
purchase six hundred times as much coal, and forty times as much
wheat.
Demnd and sup#y.--The causes which determine the reciprocal
values of commodities, or, in other words, which determine that a given
quantity of one shall exchange for a given quantity of another, must
be divided into two sets; those which occasion the one to be limited
in supply and useful, (using that word to express the power of
occasioning pleasure and preventing pain,) and those which occasion
these attributes to belong to the other. In ordinary language, the
force of the causes which give utility to a commodity is generally
indicated by the word Demand; and the weakness of the obstacles
which limit the quantity of a commodity by the word _qupply.
Thus the common statement that commodities exchange in proper-
tion to the Demand and Supply of each, means that they exchange in
proportion to the force or weakness of the causes which,give utility to
them respectively, and to the weakness or force of the obstacles by
which they are respectively limited in supply.
Unfortunately, however, the words Demand and Supply have not
been always so used. Demand is sometimes used as synonymous with
NATURE OF WEALTH. 15
upon their creditors, are often ready to act upon scarcely any premises
at all. They see that the price of some article has risen, and they
suppose that there must be some good cause for it. They see that if
they had purchased a month ago, they would have been gainers now,
and conclude that if they purchase now they will be gainers a mouth
hence. So far is this reasoning, if it can be called reasoning, carried,
that a rise in the price of any one important commodity is generally
found to occasion a rise in the price of many others. " A" (thinks a
speculator) " bought hemp before the price had risen, and has resold
it at a profit. Cotton has not yet risen, nor do I see clearly why it
should rise, any more than I see why hemp should have risen, but it
probably will rise like hemp, therefore I will purchase."
Those who are not practically conversant with commercial transac-
tions, and who are probably accustomed to consider our merchants
and capitalists as men of sober minds, and cautious conduct, may
perhaps think that we exaggerate the influence of imagination over
judgment when we suppose that largo fortunes are often risked on
such reasoning as this. We cannot support our view better than by
the authority of Mr. Tooke, a merchant of great talent and knowledge,
and, at the period when he wrote, forced for his own safety, to watch
narrowly the phenomena which he described. The passages which
we subjoin are taken from his account of the circumstances which
occasioned the extraordinary rise of prices in the beginning of 1825.
" The dose of each year 9 is the period at which, by annual custom,
the stocks of goods on hand, and the prospects of supply and con-
sumption for the coming season, are stated and reasoned upon by
merchants and brokers in circular letters addressed to their corre-
spondents and employers. By these circulars it appeared (at the
close of 1824) that, of some important articles, the stock on hand fell
short of that at the close of the preceding year. From this the con-
clusion was more or less plausibly deduced, that the rate of the annual
consumption of those articles was outrunning the rate of the annual
supply, and that an advance in price ought to take place; and at the
same time, there were, as in thecase of cotton and silk, confident reports
of the failure of crops or other causes which would inevitably diminish
the forthcoming supply. Expectation of scarcity was thus combined
with actual deficiency in exciting the spirit of speculation. This was
directed in the first instance to the artiele_ which, upon fair mereantil6
grounds, justified and called for some advance in price, inasmcuh as
the rate of the consumption of them had outrun the average rate of
supply. The rise, however, which would have been requisite to
increase the supply, or to diminish the consumption, would, in most
of the eases in question, have been trifling.
" But when speculation is once on foot, the rise of any one article
Considerations
on the_qtateof the Currenc_p. 43.
NATURE OF WEALTH. 1,¢_
may not only be in a ratio far greater than the occasion really calls
for, but may cause indirectly a rise in other commodities.
"The impulse, therefore, to a rise being given, and every succeeding
purchaser having realized, or appearing to have the power of realizing,
a profit, a fresh inducement appeared in every step of the advance to
bring forward new buyers. These were no longer such only as were
conversant with the market: many persons were induced to go out
of their own line, and to embark their funds, or stretch their credit,
with a view to engage in what was represented to them by the brokers
a certain means of realizing a great and immediate gain.
" Cotton exhibited the most extraordinary instance of speculation
carried beyond all reasonable bounds. Silk, wool, and some other
articles, in which some advance was justified by the relative state of
the supply and demand, became the subjects of a speculative anticipa-
tion, and advanced much beyond the occasion, as the event proved,
though not in so great a degree as cotton.
"Never did the public, that part of it at least which entered into
the vortex of the operations in question, exhibit so great a degree of
infatuation, so complete an abandonment of all the most ordinary
rules of mercantile reasoning since the celebrated bubble year !720,
as it did in the latter part of 1824, and in the first three or four
months of 1825.
" The speculative anticipation of an advance was no longer confined
to articles which presented a plausible ground for some rise, however
small. It extended itself to articles which were not only not deficient
in quantity but which were actually in excess. Thus coffee, of which
the stock was increased compared with the average of former years,
advanced from 70 to 80 per cent. Spices rose in some instances from
100 to 200 per cent. without any reason whatever, and with a total
ignorance on the part of the operators of every thing connected with
the relation of the supply to the consumption.
"In short, there was hardly an article of merchandise which did
not participate in the rise. For it became the business of the specu-
lators or the brokers, who were interested in raising and keeping up
prices, to look minutely through the general Price Currents with a
view to discover any article which had not advanced, in order to make
it the subject of anticipated demand.
" If a person not under the influence of the prevailing delusion
ventured to inquire for what reason any particular article had risen,
the common answer was, 'Every thing, else has risen, and therefore
this ought to rise.' "
When we consider that the supply of large classes of commodities
is dependent ou our amicable or hostile relations with foreign States,
and on the commercial and financial legislation both of those States
and of our own Country, and that the supply of still larger classes is
dependent not only on those contingencies, but on the accidents of the
20 NATUREOF WEALTH.
same time and in the same direction. And as quite as many are
likely to experience a similar variation, but in an opposite direction.
there is really no compensation. A commodity, therefore, which is
strikingly subject to such variations, is properly said to be unsteady
in value.
But we may be asked to account for another and not unfrequent
statement, that at particular periods all commodities have been observed
to rise or fall in value. Literally taken, this statement involves a
contradiction in terms, since it is impossible that a given quantity of
every commodity should exchange for a greater or a less quantity of
every other. _:hen those who make this statement have any meaning,
they al_vays tacitly exclude some one commodity, and estimate in that
the rise or fall of all others. The excluded commodity is, in general.
money or labour.
Estimated iu labour, all commodities, money included, have fallen
in value in England since the XVIth Century. It is scarcely possible
to mention one of which a given quantity will not purchase less labour
than it did at the close of Elizabeth's reign: estimated in money,
almost all commodities, labour included, have fallen in England since
the termination of the late war.
The last remark which we shall now make on value is, that: with
a very few exceptions, it is strictly local. A ton of coal at the bottom
of the pit near Newcastle is perhaps worth 2s. 6d., at the pit's mouth
it is perhaps worth 5s., at ten miles off 7s., at Hull 10s. By the
time the collier has reached the Pool, its cargo is seldom worth tess
than ]6s. a ton; and the inhabitant of Grosvenor Square may perhap_
think himself fortunate if he can fill his coal cellars at 25s. a ton. '''
A ton of coal, though physically identical, must be considered, for
economical purposes, as a different commodity at the bottom of the
pit and at its mouth, in Hull and in Grosvenor Square. At every
different stage of its progress it is limited in supply by different
obstacles, and consequently exchangeable for different things and
in different proportions. Supposing that at Newcastle a ton of the
best wheat is now worth about twenty tons of the best coal: the same
wheat and coal at the west end of London may probably exchange
in the proportions of about four tons of coal for one of wheat. At
Odessa, they may perhaps exchange about weight for weight.
Whenever, therefore, we speak of the value of a commodity, it is
necessary to state the locality both of the commodity in question and
of the commodity in which its value is estimated. And in most cases
we shall find their respective proximity to the places where they are
respectively to be made use of one of the principal constituents of their
respective values. The purchaser of the distant commodity has to
consider the labour of transporting it to the place of consumption, the
time for which that labour must be paid in advance, and the taxation,
and the risk of injury or loss to which it may be subject in its transit.
Nor is this all. He must also consider the danger that its_quality
may not correspond with the description or sample which guided him
in making the purchase. The whole expense and risk attending the
transport of a diamond from Edinburgh to London are but trifling;
but its value is so dependent on its form and lustre, and those are
qualities as to which it is so dii_cutt to satisfy any purchaser who
cannot ascertain them by inspection, that it would be difficult to obtain
in London a fair price for a diamond in Edinburgh. Again, though
a given quantity of coal from a given mine is generally of an ascer-
tained quality, yet the expense, loss of time, risk, and taxation, which
must be incurred in its transport from Newcastle to Grosvenor Square,
are such, that a ton of coal, when it has reached Grosvenor Square,
may be of nearly five times the value which it bore at l_cwcastle.
OBJ_CTIO,_'STO _HV.DErI_-IZlO_ or WEALZa CO_'SmEaED.
The definition of Wealth, as comprehending all those things, and
those things only, which have Value, or, in other words, which may
be purchased or hired, does not, we believe, precisely agree with that
adopted by any Economist except Archbishop Whately.
The principal differences are these: some writers confine the term
Wealth to what have been termed material products; some to those
things which have been produced or acquired by human labour; and
some object to the ideas of value or exchange being introduced into
the definition of Wealth.
The question whether the things which have been called immaterial
ought to be considered articles of wealth, we shall consider when we
treat of production.
Some of the writers who, expressly or impliedly, restrict the term
Weahh to the things, the production or appropriation of which has
cost human labour, as for instance Mr. Mill, Mr. M'Culloch, Colonel
Torrens, Mr. Malthus, and M. Flores-Estrada, appear to suppose that
a definition so restricted will comprise every thing that can properly
be termed wealth; others, among whom is _Ir. _icardo, admit that
there are some things falling" within that term which have not been
acquired by human exertion, but think them so few or unimportant
that it is better to omit them than to disorder the symmetry of the
Science by extending it to any thing that is not the result of labour.
The former doctrine is clearly stated in the following passages from
Mr. Malthus, Colonel Torrens, and Mr. M'Culloeh.
" Wealth. The material things necessary, useful, or agreeable to
man, which have required some portion of human exertion to appro-
priate or produce.""
n Malthus,Definitions,p. 2"J4.
.NATUREOF WEALTH. 03
W_ have already stated that the general facts on which the Science
of Political Economy rests, are comprised in a few general Propositions,
the result of observation or consciousness. The Propositions to which
we then alluded are these :--
2. That the Population of the world, or, in other words, the number
of pcrs_ts inhabiting it, is limited only by moral or physical evil, or by
fear of a deficiency of those articles of wealth which the habits of the
individuals of each class of it,s i_,habi_ants lead them to require.
increased labour bestowed on it, the produce of that one farm might
feed the whole population of England.
DEVELOPMENT OF THE FIRST ELEMENTARY PROPOSITION OF THE
rises fi'om the lowest to the middling classes of society, they become
to him decencies. He wears them to preserve, not his feet, but his
station in life. To the highest class, who have been accustomed to
them from infancy, they are as much necessaries as they are to all
classes iu England. To the higher classes in Turkey wine is aluxury
and tobacco a decency. In Europe it is the reverse. The Turk
drinks and the European smokes, not in obedience, but in opposition
both to the rules of health and to the forms of society. But wine in
:Europe and the pipe in Turkey are among the refreshments to which
a guest is entitled, and which it would be as indecent to refuse in the
one Country as to offer in the other.
It has been said that the coal-hearers and lishtermen, and some
others among the hardworking London labourers, could not support
their toils without the stimulus of porter. If this be true, porter is
to them a necessary. To all others it is a luxury. A carriage is a
Decency to a woman of fashion, a Necessary to a physician, and a
Luxury to a tradesmen.
The question, whether a given commodity is to be considered as a
decency or a luxury, is obviously one to which no answer can be
given, unless the place, the time, and the rank of tbe individual using
it be specified. The dress which in England was only decent a hundred
years ago, would be almost extravagant now, while the house and
furniture which now would afford merely decent accommodation to a
gentleman, would then have been luxurious for a peer. The causes
which entitle a commodity to be called a necessary are more perma-
nent and more general. _?hey depend partly upon the habits in which
the individual in question has been brought up, partly on the nature
of his occupation, on the lightness or the severity of the labours and
hardships that he has to undergo, and partly on the climate in which
he lives.
Of these causes we have illustrated the two first by the familiar
examples of shoes and porter. But the principal cause is climate.
The fuel, shelter, and raiment, which are essential to a Laplander's
existence, would he worse than useless under the Tropics. And as
habits and occupations are very slowly changed, and climate suffers
scarcely any alteration, the commodities which are necessary to the
different classes of the inhabitants of a given district may, and gener-
ally do, remain for centuries unchanged, while their decencies and
luxuries are continually varying.
Among all classes the check imposed by an apprehended deficiency
of mere luxuries is but slight. The motives, perhaps we might say
the instincts, that prompt the human race to marriage, are too power-
ful to be much restrained by the fear of losing conveniences uneon-
neeted with health or station in society. Nor is population much
retarded by the fear of wanting mere necessaries. In comparatively
uncivili-ed Countries, in which alone, as we have already seen, that
38 POPULATIOlq.
maintained, as well, perhaps far better, than the one thousand millions
now supposed to exist on its surface. It _s possible, we will not say
even that it is improbable, that in the course of centuries, or rather
of hundreds of centuries, these splendid visions may be realized.
But all experience shows, that no numerous and civilized nation,
surrounded by other civilized nations, can venture to rely on emigra-
tion as a permanent and adequate cheek to population. We say no
numerous and civilized nation surrounded by other civilized nations;
for we are aware that the hordes of Central Asia and of the _'orthern
parts of Europe, and tile surplus inhabitants of some smail communities,
such as the petty States of ancient Greece and Phoenicia, appear to
have found, the one in colonization, the others iu armed migrations,
a periodical outlet; and that the Americans of European descent have
enjoyed for centuries, and for centuries to come may enjoy, in the
immense continent behind them, room for as rapid an increase of
their numbers as the most unchecked propagation can supply. But
these are not examples which Europe, as now constituted, can imitate.
When all the land fi'ontier is appropriated,--when invasion for the
purpose of settlement is impossible, and the solitary traveller is
repelled by a different language, different laws, different arts, and
often a different religion,--wheu the other alternative is an expensive
and distant vo3age , and either an un._ettled, and therefore in general
an unwholesome country, or eqm,1 obstacles from variations of laws,
language, religion, and arts, in a previously settled district,--when
these are the difficulties to be encountered, no extensive and systematic
emigration will be persisted in. Even the different parts of the same
empire afford little assistance to one another, if difference of language,
or habits, or considerable distance be interposed. The Austrian
dominio,,s cont_dn some of the most thinly and some of the most _hickly-
peopled portions of Europe; but Itungary is not colonized flom the
plains of Lombardy. If any European nation could hope to make
emigration a complete substitute for prudence, that hope might be
entertained by the inhabitants of the British Islands. We have the
command of unoccupied continents in each hemisphere, the largest
navy that the world ever saw to convey us to them, the largest capital
timt ever has been accumulated, to defray the expense, and a popula-
tion remarkable not merely for enterprise, but for enterprise of this
particular description. These advantages we have enjoyed for
centuries; almost from the times of the Tudors we have possessed
a large outskirt of empire far exceeding in extent our European
possessions. And yet during this long period how little effect has
emigrat,on produced on our numbers ! The swarms which we have
sent out, and which we now send out, seem to be instantaneously
replaced. We have founded one empire, and probably shall found
many; but, after once a colony has been planted, its principal
increase arises_ not from the comparatively scanty recruits _'hom
42 POPULATION.
But we must admit that ours are not the received opinions; or
perhaps we ought to say, that our statement is opposed, on the one
side or on the other, to the language used by almost every writer who
has directly treated the subject of population. Almost every Econo-
mist will be found, in that part of his writings in which what has been
called the prbTc_le of population is the immediate and principal
question considered, to range himself under one of two hostile banners,
each opposed not only to the other, but also to the doctrines which wo
have endeavoured to explain. On one side arc those who believe that
an increase of numbers is necessarily accompanied, not merely by a
positive, but by a relative increase of productive power; that density
of population is the cau__eand the test of prosperity; and that, " were
every nation under the sun to be relcased from all the natural and
artifi'eial checks on their increase, and to start off breeding at the
fastest possible rate, many, very many generations must elapse before
any necessary pressure could be felt." 1,
On the other side are those who maintain that population has a ten-
dency (using the word tendency to express likelihood or probability)
to increase beyond the means of subsistence; or, in other words, ttmt,
whatever be the existing means of subsistence, population is hkely
fully to come up to them, and even to struggle to pass beyond them.
a,d is kept back principally by the vice and misery which thas
struggle must produce.
The whole of our previous remarks afford an answer to the first.
mentioned class of writers. We shall not therefore recur to them.
The opinions of the other class we shall consider at some length; and
we will begin by the following quotations from Mr. M'Culloch, Mr.
Mill, and Mr. Malthus.
Among the valuable notes which Mr. M'Culloch has appended to
his edition of the IVca[th of Nations. one of thc most inte,'cstmg treats
of population; and one of the objects of that note is to show that the
population of the United States of America cann:_t continue to increase
for al_y very considerab)e period at the rate at which it has increased
during the last hundred years. _Ve are perfectly convinced of the
correctness of this anticipation; and we make the following extract,
not with any intention to oppose Mr. M'Culloch's opinions as to
America, but because we are anxious to express our dissent to the
form in which he lays down the general doctrine of population.
"It may be said, perhaps," says Mr. M'Culloch, " that allowance
must tm made for the effects of the improvements which may be sup-
posed to take place in agrieultm'al science in the progress of society,
or ths possible introduction, at some future period, of new and more
prolific species of crops. But it is easy to see that the influence of
such improvements and changes must, supposing them to be realized
DEVELOPMENT
OF THETHIRDELEMENTARYPROPOSITION
OFTHE
SCIENCE,_NAMELY_--
That the powers of Labour, a_l of the other Tnstruments which produce
Wealth, may be indefinitely increased by using their Products as the
means of.further Production.
production.--Having explained the sense in which we use the word
Wealth, and given an outline of the doctrine of Population, we no_r
proceed to consider Production, or the means by which wealth is
PRODUCTION. 51
produced. The first terms to be defined are the verb produce, and
the substtintive product.
Product.--To uroducc, as far as Political Economy is concerned, i_
to occasion an a_terallon in the condition of the existing particles of
matter, for the occasioning of which Alteration. or for the thi',gs thence
rcsutt_g, something may be obtained in excha_ge. This alteration is
a product. It is scarcely necessary to remind our readers that matter
is susceptible neither of increase nor diminution, and that all which
man, or any other agent of which we have experience, can effect, is to
alter the condition of'its existing particles. But as Political Economy
treats only of wealth, and therefore only of those alterations of whic_
wealth is the result, we are forced to exclude all other aheratim_s
l_6m the definition of Products. The child who builds a castle with
sand on the shore, and the child who kicks it down, each occasioTJs
effects the same in kind as the man who builds or pulls down a
palace ; but as the exertions of the latter entitle him to be paid, he is
properly said to lyrod_ce, and the result of his conduct, whether it be
_lle covering' with buildings ground previously unoccupied, or render-
ing vacant what was previously built over, is properly called a Product.
product_ divided into _errices and commoditie_.--Pr0ducts have
been divided into material and immaterial, or, to express the same
distinction in different words, into commodities and services. This
distinction appears to have been suggested by Adam Smith's well-
known dMsion of labour into productive and unproductive. Those
who thought the principle of that division convenient, feeling at the
same time the difficulty of terming unproductive the labour without
which all other labour would be inefficient, invented the term services
or immaterial products, to express its results.
It appears to us, however, that the distinctions that have been
attempted to be drawn between productive and unproductive labourers,
or between the producers of material and immaterial products, or
between commodities and services, rest on differences existing not in
the things themselves, which are the objects considered, but in the
modes in which they attract our attention. In those cases in which
our attention is principally called, not to the act of occasioning the
alteration, but to the result of that act, to the thing altered, Econo-
mists have termed the person who occasioned that alteration a pro-
ductive labourer, or the producer of a commodity or material produet.
Where, on the other hand, our attention is principally called not to
the thing altered, but to the act of occasioning that alteration, Econo-
mists have termed the person occasioning that alteration an unpro-
ductive labourer, and his exertions, services, or immaterial products.
A shoemaker alters leather, and thread, and wax, into a pair of shoes.
A shoeblack alters a dirty pair of shoes into a clean pair. In the
first ease our attention is called principally to the things as altered.
The shoemaker, therefore, is said to make or produce shoes. In the
5_ PRODUCTION.
sumptlcn; such are lace, embroidery, jewellery, and the oth,r personal
ornaments which are simply decorative, and afford neither warmth
nor protection. Under thi_ head may also be ranked tobacco and
smffi" and the other stimulants, of which the best that can be said is,
d/at they are not injurious. A much larger class of commodities is
designed solely for productive use, and is never consumed unprodnc-
tively, but by mistake. In this claqs arc all tools, from the simplest
to the most complicated; from the spade and the raft, to the steam
engine and the indiaman. But the _eneralitv of commodities may be
used, aceordiug to the will of the proprietor, productively or unpro-
ductively; may be consumed so a_ to substitu;e some product in lieu
of that which has been dc_tr:,yed, or without any further beneticial
result than the immed,ate p!casure wi_ich has accompanied their use.
Whatever is capable of' supporting human existence may be used to
maintain tho_e who are themsel_es producers, or those who are not.
In the first case it is productively, in the second unproducti,'cly con-
sumed.
The distinction between p._oductlve and unproductive co_.¢_,mer.eis
less clearly marked than that between productive and unproductive
cons_mption. To divide men into two classes, nrodaetive and unpro-
ductive consumers, would, in fact, be a false division, there being few
who do not in some rc.-pcets belong to both classes. So far as a
man's consumption is essential to his production, he belongs to ti_e
first class; so far as it is m)t essential, to the second. Ti_ose only
can be called simply unproductive wire return nothing whatever for
what they consume; those only simply productive who indulge in no
superfluous consumption whatever-
To the first description belong those who, being provided, through
their own previous exertions, or by the accidents of donation or inheri-
tance, with a fired suilicienr for their subsistence, are content to dedicate
their revenue and their leisure to the purposes of mere enjoyment.
This class is never large in any state of society. In an ignorant.
and eonseqqently a poor community, tim number of those possessin:r
a maintenance independent of exertion is necessarily small. Among"
civilized nations the love of accumulation, of power, of distinction,
and of occupation, and the nobler desire of being more or less exten-
sively useful, all powerfully counteract the slothful principles of our
nature. As property becomes more secure, as the avenues to influence
are opened, as merit and wealth rise in puhlic estimation over the
accidents of birth, as barbarous prejudices degrading to indm, try wear
out, as the influence of seined rehgion teaches men that the.)" were
created for better purposes than selfish pleasure or useless mortifica-
tion, in fact, as civilization improves, all the motives to voluntary
exertion acquire force. And though the number of those who m_ght
live in idleness increases, the proportion of those who are unhappy
enough to exercise that privilege diminishes,
5_ PI_0DUCTIONAND CONSUMPTION.
Another class consists of those who derive their support soIely from
the spoil or the charity of others. The number of those who live by
rapine has obviously a tendency to diminish in the progress of civiliza-
tion. About mendicancy there may be some doubt, as some super-
fluous wealth seems necessary to its existence, and it may be supposed
likely to increase with the superfluity on which it feeds. That laws
ill framed or ill administered may allow it so to increase we know,
from our own experience. But there seems to be no reason to doubt
that, under a wise system of commercial and municipal legislation,
the number of able-bodied paupers might be so reduced as to be
practically unimportant.
The last class of unproductive consumers consists of those whom
age or infirmity has rendered permanently incapable of production.
We say loermanerctly, to exclude children, and those suffering under
temporary disability. Though a child or an invalid make no immediate
return, their support is the necessary condition of their future services.
This is by far the largest of the unproductive classes, and one not
likely to suffer relative diminution, the same causes which tend to
obviate disease and injury tending also to prolong life where their
effects are incurable. :Bat from the information collected in the House
of Commons' Report on Friendly Societies, 5th July, 1825, vol. iv.,
we are inclined to think that in this Country the class in question
cannot amount to a fortieth part, or about two-and a-half per cent. of
the whole community.
The number of absolutely productive consumers, that is, of persons
who consume solely for the purpose of reproducing, is much smaller.
It may be a question indeed whether in a Country free from slavery,
or regulations resembling slavery, any such class is to be found. The
humblest labourer has some expenses which are not essential to his
health and strength. We endeavour to give to our domestic animals
nothing beyond what is strictly necessary, and in the Countries where
man is considered as a domestic animal it might be expected that the
consumption of a slave would be equally limited. But even the slave
generally acquires some peculium, which implies that his ordinary
subsistence somewhat exceeds his wants.
It appears from this analysis that the bulk of the community are
neither productive nor unproductive consumers, but may be referred
to the one class or to the other, according to the portion of their
expenses for the time being under consideration. So far as the
husbandman takes just enough of the least expensive food, is just
sufficiently clad with the simplest raiment, and inhabits a dwelling
just sufficiently weather-tight and spacious to protect him from the
seasons, he is a productive consumer. But his pipe and his gin, and
generally speaking his beer, and the humble ornaments of his person
and his dwelling, form his unproductive consumption.
We do not, of course, mean it to be inferred that all personal
INSTRUMENTS OF PRODUCTION. 57
for money, and the money yields him as little till it is again exchanged
for goods. His capital is continually going from him ill one shape, and
returning to him in another, and it is only by means of such circula-
tion, or successive exchanges, that it can yield him any profit. Such
capitals, therefore, may properly be called circulatb_g capitals.
" Secondly, it may be employed in the improvement of land, in the
purchase of useful machines and implements of trade, or in such like
things as _yield a revenue or profit without changing masters or cir-
culating any fm-ther. Such capitals, therefore, may properly be called
/_xe_l capitals.
'" Tile capital of a merchant is altogether a circulating capital, lie
has occasion for no machines or instruments of trade, unless his shop
or warehouse be considered as such.
" Some part of the capital of every master artificer or manufacturer
must be fixed in the instrmnents of his trade. This part, ho_-ever,
is very small iu some, and very large in others. A master tailor
requires no other instrument of trade than a parcel of needles;
those of a master shoemaker arc a little, though but a little, more
expensive.
" In other works a much greater fixed capital is required. In a
great iron work, for example, the furnace, the forge, the slit mill, are
instruments of trade which cannot be erected without a very great
expense. That part of the capital of the farmer which is employed
in the instruments of agriculture is a fixed, that which is employed in
the wages and maintenance of his labouring servants is a circulating,
capital. He makes a profit of the one by keeping it in his own
possession, and of the other by parting with it. A herd of cattle,
bought in to make a profit by their milk and increase, is a fixed
capital; the profit is made by keeping them. Their maintenance is
a circulating capital; the profit is made by parting with it." (Book
ii. oh. i.)
We are not aware that the principle of Adam Smith's division has
ever been directly objected to. There may be some doubt, perhaps,
whether the terms fixed and circulating are the best that could have
been selected; but Adam Smith has stamped on them the meaning
which he intended, and they have passed current in that signification
ever since.
Mr. Ricardo, however, with the inattention to established usage
which so much diminishes the usefulness of his writings, has used the
terms fixed and circulating capital in a totally different sense. In this
he has been followed by _Ir. 5Iill; and as neither of these writers
intimates that his use of the words is not the common one, it may be
well to mark the difference.
"According as capital is rapidly perishable," says 5Ir. Ricardo,
"and requires to be frequently reproduced, or is of slow consumption,
it is classed under the heads of circulating or of fixed capital: a
F1XED AND CIRCULATINGC._.PITAL. 63
the effect of their combination has not been perceived. Printing and
paper are both of high antiquity. Printing was probably known to
the Greeks; it certainly was practised by the Romans, as loaves of
bread stamped with the baker's initials have been found in Pompeii.
And paper has been used in China from times immemorial. But
these instruments separately were of little value. While so expen-
sive a commodity as parchment, or so brittle a one as the papyrus,
were the best materals for books, the sale of a number of good copies
sufficient to pay the expense of prii_ting could not be relied on.
Paper without printing was more useful than printing without paper;
but the mere labour necessary to constant transcription, even sup-
posing, the materials to be of no value, would have been such as still
to leave books an expensive luxury. But the combination of these
two instruments, each separately of little utility, has always been
considered the most important invention in the history of man.
II. Divisioml of L.bour.--The second of the two principal advan-
tages derived from Abstinence, or, in other words, from the use of
Capital, is the Division of Labour.
We have already observed that Division of Production would have
been a more convenient express,on than Division of Labour; but Adam
Smith's authority has given such currency to the term Division of
Labour, that we shall continue to employ it, using it, however, in the
extended sense in which it appears to have been used by Adam
Smith. We say alrl)ears to have been used, because Smith, with his
habitual neglig'encc of precision, has given no formal explanation of
his meaning. But in the latter part of his celebrated first chapter,
he appears to include among the advantages derived from the division
of labour all those derived from internal and external commerce. It
is clear, therefore, that, by Division of Labour, he meant Division of
Production, or, in other words, the confining, as much as possible
each distinct producer and each distinct class of producers to opera-
tions of a single kind.
The advantages derived from the division of labour arc attributed
by Smith to three different circumstances. " First, to the increase of
dexterity in every particular workman; secondly, to the saving of the
time which is commonly lost in passing from one species of work to
another; and lastly, to the invention of a g_'eat number of machines
which facilitate and abridge labour, and enable one man to do the
work of many."
Smith was the first writer who laid much stress on the division of
labour. The force and the variety of the examples by which he has
illustrated it make the first chapter perhaps the most amusing and
the best known in his whole Work. But, like most of those who have
discovered a new principle, he has in some respects overstated, and
in others understated, its effects. His remark, " that the invention
of all those machines by which labour is so much facilitated and
74 DIVISION OF LABOUR,
of above 40s. a pound instead of ls. 6d., that is, at the cost of the
labour of about one million two hundred thousand men instead of
forty-five thousand, we might produce our own tea, and enjoy the
pride of being independent of China. But one million two hundred
thousand is about the number of all the men engaged in agricultural
labour throughout England. A single trade, and that not an extensive
one, supplies as much tea, and that probably of a better sort, as could
be obtained, if it were possible to devote ever)' farm and ever)" garden
to its domestic production.
The greater part of the advantage of rather importing than growing
and manufacturing tea arises, without doubt, from the difference
between the clim,tes of China al,d Engh_nd. Bat a great part also
arises from the different price of labour iu the two Countries. Not
only the cuhivation of the tea plant, but the preparation of its leaves,
requires much time and atteotlon. The m,mey wa_es of labour are
so low in C_lina, that these processes add httle to the money coat of
the tea. In England the expense would be intolerable. When a
nation, in which the powers of production, and coosequeut]y the wages
of labour, arc hig-h, employs its own members m performing duties
that could be as effectually performed by the tess valuable labour of
les_. elvihzed nations, it is guilty of the same folly as a tarmer who
should plough with a Race-hor_-e.
Another important consequence of the division of labour is the
existence of retail_.rs; a class who, without being themselves employed
in the direct production of raw or manufactured commodities, are, in
fact, the persons who supply them to their ul:imate purchasers, and
that at the times and in the portmns which tile convenience of those
purchasers requires. When we look at a map of London and its
sut,urbs, and consider that that p_owut.e covered witil houses contains
more than a tenth of the inhabitants _)f England, and consumes per-
h_lps one-fifth in value of all that is consumed in E,gland, and obtains
what it consumes, not from its own re_,uurces, but from the whole
civilized worhl, it seems marvellous that the daily supply of such
multitudes should be apportioned with _ny thing like accuracy to their
daily wants. It is effected prii,_cip,dly by means of the retailers.
F, aeh retailer, the centre of his own system of purchasers, knows, by
experience, the average amount ot their permdlcal wants. The
wholesale dealer, who forms the link between the actual producer or
importer, and the retailer, knows also, by expermnee, the average
amount of the demands of hi,_ own purchasers, the retailers; and is
governed by that experience in his purchases from the importer or
producer. And the average amouot of these last purchases affords
the data on which the importers and producers regulate tile whole
vast and muhifarious supply. It can seareety be necessary to dwell on
the further advantages derived from the readioess and subdivision of
the retailer's stock; or, to point out the convenience of having to buy
78 DIVISION OF LABOUR.
pleted and sold. That he must be kept supplied with those articles
is true; but they need not have been stored up before he first sets to
work, they may have been prod_lced while his work was in progress.
Years must often elapse between the commencement and sale of a
picture. :gut the painter's subsistence, tools, and materials for those
years are not stored up before he sets to work : they are produced
from time to time during' the course of his labour. It is probable,
however, that Adam Smith's real meaning was, not that the identical
supplies which will be wanted in a course of progressive industry
must be already collected when the process which they are to assist
or remunerate is about to be begun, but that a fund or source must
then exist from which they may be drawn as they are required. Tha_
fund must comprise in specie some of the things wanted. The painter
must have his canvas, the weaver his loom, and materials, not enough,
perhaps, to complete his web, but to commence it. As to those com-
modities, however, which the workman subsequently requires_ it is
enough if the fund on which he relies is a productive fund, keeping
pace with his wants, and virtually set apart to answer them.
But if the employment of capital is required ibr the purpose of
allowing a single workman to dedicate himself to one pursuit, it is still
more obviously necessary ill order to enable aggregations, or classes of
producers, to concur, each by his separate exertions, in one production.
Ill such cases even the mere matter of distribution, the mere appor-
tionment of the price of the finished commodity among the different
producers requires the e'rbplo_ment of a considerable capital, and for
a considerable time, or, in other words, a considerable exertion of
abstinence.
• The produc.¢of_ independent labour belongs
. by natm'e
. . to
Its producer. But where there has been a considerable d.vlsmn of
labour, the product has no one natural owner• If we were to attempt
to reckon up the number of persons engaged in producing a single
neckcloth, or a single piece of lace, we should fiud the number amount
to many thousands; in fact, to many tens of thousands. It is obviously
impossible that all these persons, even if they could ascertain their
respective rights as producers, should act as owners of the neckcloth
or the lace, and sell it for their common benefit.
This difficulty is got over by distinguishing those who assist i_
production by advancing capital, from those who contribute only
labour_a distinction often marked by the terms master and workman;
and by arranging into separate groups the different capitalists and
workmen engaged in distinct processes, and letting each capitalist, as
he passes on the commodity, receive from his immediate successor the
price both of his own abstinence and of his workmen's labour•
It may be interesting to trace this process in the history of a
coloured neckcloth or a piece of lace. The cotton of which it is
formed may be supposed to have been grown by some Tenessee or
Louisiana planter. For this purpose he must have employed labourers
80 DMSION OF LABOUR.
in preparing the soil and planting and attending to the shrub for more
than a year before its pod ripened. When the pod became ripe, con-
siderable labour, assisted by ingenious machinery, was necessary to
extricate the seeds fl'om the wool. The fleece thus cleaned was
carried down the Mississippi to New Orleans, and there sold to a
cotton fdctor. The price at which it was sold must have been sufficient,
in the first place, to repay to the phmter the wages which had been
paid by him to all those employed in its production and carriage; and,
seconclly, to pay him a profit prop,,rtioned to the time which had
elapsed between the payment of those wages and the sale of the
cotton; or. in other words, to remunerate him for his abstinence in
having so long deprived himself of the use of h,s money, or of the
pleasure which he might have received from the labour of his work-
people, if, instead of cultivating cotton, he had employed them in
contributing to his own immediate enjoyment. The New Orleans
factor, after keeping it perhaps five or s_x months, sold it to a Liverpool
merchant. Scarcely any labour could ha. e been expended on it at
:New Orleans, and, in the absence of accidental circumstances, its
price was increased only by the profit of the cotton factor, a profit
which was the remuneration of his abstinence in delaying, for five or
six months, the gratification which he might have obtained by the
expenditure on himself of the price paid by him to the planter. The
Liverpool merchant brought it to England and sold it to a Manchester
spinner. He mu._t have sold it at a price which would repay, in the
first place, the price at which it was bought from the factor at New
Orleans; in the s_,cond place, the freight from thence to Liverpool;
(which freight includes a portion of the wages of tile seamen, and of
the wages of those who built the vessel, of the profits of those who
advanced those wages before the vessel was completed, of the wages
and profits of those who imported the materials of which that vessel
was built, and, in fact, of a chain of wages and profits extended to
the earliest dawn of civilization;)and, thirdly, the merchant's profit
for the time that these payments were made before his sale to the
manufacturer was completed.
The spinner subjected it to the action of his work-people and
machinery, until he reduced part of it into the thread t_pplicable to
weaving muslin, and part into the still finer thread that can be formed
into lace.
Thc thread thus produced he sold to the weaver and to the lace-
maker; at a price repaying, in addition to the price that was paid to
the merchant, first, the wages of the work-people immediately engaged
in the manufacture; secondly, the wages and profits of all those who
supplied, by the labour of previous years, the buildings and machinery;
and, thirdly, the profit of the master spinner. It would be tedious to
trace the transmission of the thread from the weaver to the bleacher,
from the bleacher to the printer, from the printer to the wholesale
AGRICULTURAL AND MANUFACTURING I_DUSTRY. _l
are waste. All that is not waste is productively employed, but hew
small is its produce compared to the amount to which unlimited
labour and abstinence might raise it! If the utmost use were n,ade
of lime, and marl, and the other mineral manures; if hy a perfect
system of drainage and irrigation water were nowhere allowed to t,e
excessive or deficient; if all our wastes were protected by enclosure_
and planting; if all the laud in tillage, instead of being scratched 1,v
the plough, were deeply and repeatedly trenched by manual labgm:.
if minute care were employed in the selecting and planting of every
seed or root, and watchfulness sufficient to prevent the appearance of
a weed; if all live stock, instead of being pastured, had their food cut
and brought to them: in short, if the whole Country were subjected to
the labour which a rich citizen lavishes on his patch of suburban gar-
den: if it were possible that all thi_ should be effeeted, the agricultural
produce of the Country might be raised to ten times, or indeed t(,
much more than ten times, its present amount. No additional labour
or machinery can work up a pound of raw cotton into more than a
pound of manulactured cotton; but the same bushel of seed-corn, and
the same rood of land, according to the labour at)d skill with whicil
they are treated, may produce four bushels, or eight bushels, or sixteen.
But although the land in England is capable of producing ten
times, or more than ten times as much as it now produces, it i¢
probable that its present produce will never be quadrupled, and almost
certain that it will never be decupled.
On the other hand, unless our manufaetures be checked by war. or by
the continuance or introduction of legislative enactments unfavourable
to their progress, their produce may increase during the next eentm'v
at the same rate, or at a still greater rate, than it increased during tl_e
last century. It may be quadrupled, or much more than quadrupled.
The advantage possessed by land in repaying increased labour, ti_ough
employed on the same materials, with a constantly increasing produce.
is overbalanced by the diminishing proportion which the increase ot
the produce generally hears to the increase of the labour. And the
disadvantage of manufactures in requiring for every increase of produce
an equal increase of materials, is overbalanced by the eonstantlyinereas-
ing facility with which the increased quantity of materials is worked up.
A century ago the average annual import of cotton wool into Great
Britain was about one million two hundred thousand pounds. The
amount now annually manufactured in Great Britain exceeds two
}mndred and fort)- millions of pounds. :But though the materials now
manufactured are increased at least two hundred times, it is obvious
that the labour necessary to manufacture them has not increased two
hundred times. It may be doubted whether it bas increased thirty
times. The whole number of families in Great Britain, exclusively of
those employed in agriculture, amounted, at the enumeration in 1_ o1,
to 2,453,041; if we suppose the transport, manufacture, anal sale of
54 AGRICULTURALAND MANUFACTURINGINDUSTRY.
principle can we account for any land except the very best having
been ever cultivated. For if the farmer could have gone on applying
additional labour to land already in cultivation without any diminution
in the proprotionate return, it is clear that he never woul_t have culti-
vated the three hundred acres of inferior land. In fact, if this were
the case, if additional labour employed in agriculture gave a propor-
tionate return, he never need have cultivated more than a single acre,
or even a single rood. It is probable that in the supposed case he
would employ some of his additional labourers in breaking up a
portion of the down, and some of them in cultivating more highly the
land already in tillage. So employed, they might produce an ad&-
tional crop of four hundred, or five hundred, or five hundred and fifty
quarters, but it is certain that the additional crop wo_fld not be eqm;.1
to the whole six hundred previously obtained: the produce would be
increased, but would not be doubled.
This imaginary farm is a miniature of the whole Kingdom. We
have in ]_ngland large tracks of barren waste, and we have under
cultivation soil of every description of fertility, from that which pro-
duces forty bushels of wheat an acre, to that which produces, with
the same labour, and on the same extent of land, only twelve ,,r
thirteen. If additional produce is to be raised, the resource, gent_rally
speaking, must be either the cultivation of what has been as ve_
untilled on account of its barrenness, or the employment of additional
labour on what is now in cultivation. That in either case the addi-
tional produce is not likely to be in the pro_*ortion of the additiotial
labour, is as obvious in the ease of the whole' Kingdom, as it has
appeared to be in that of a single farm.
But the proposition which we have been endeavouring to illustrate.
though general, is not universal; it is smject to material exceptions.
In the first place, the negligence or ignorance of the occupier, or
proprietor, or obstacles tff ownership, often prevent for a tong time
particular portions of land from being subjected to the average degree
of labour bestowed on land of equal capability. Increased labour,
when at length bestowed on land so circumstanced, may fairly be
expected to be as productive, indeed more productive, than the average
of agricultural labour. Advantages of this kind have sometimes
been derived from extensive operations of drainage and embankment;
but the chances of great profit are so apt to blind men to the amount
of physical obstacles, that projects of this kind are perhaps more fre-
quently attempted prematurely, than deferred till after the time when
an increased demand for raw produce first rendered them fair specu-
lations. Undertakings which have been postponed in consequence of
obstacles arising from ownership, are far more frequently productive.
The enclosure of a ton'men often subjects to the plough land of which
the former unproductiveness was not owing to deficient fertility.
Effects similar in kind, though not in degree, often take place when
SG AGRICULTURALAND MANUFACTURINGINDUSTRY.
an estate becomes unfettered, after the title has been long so cireum-
staneed that the farmers could not rely on the duration or renewal of
their leases. In these cases considerable additional produce may
often be obtained by a comparatively small addition of labour.
But the most important exception to the general rule takes place
when increase of labour is accompanied by increase of skill. More
er_eieut implements, a better rotation of crops, a greater division of
labour, in short, improvements in the art of azriculture gencral:y
accompany the increase of aqrieultural labour. They always accom-
pany that increase when it is accompanied by an increase _f tile
capital as well as of the population of a Country: and they always
counteraet, and often outweigh, the inferiority or diminished _ propor.
ti,mal powers of the soil to which they are applied.
The total amount of the annual agricultural produce of Great Britain
has much more than doubled during the last hundred years; but it is
highly improbable that the amount of labour annually employed
in agriculture has also doubled. It is not supposed that durin z that
period the population of Great Britain has more than doubled; and
the principal increase has till b_tclv been in the manufacturing districts.
The last hundred years, with all their misfortunes, form the most
prosperous period of our tlistory. We owe to them the enclosure of
millions of acres formelly almost useless common fields; we owe to
them almost all that we possess that deserves the name of Agricultural
Science; and we owe to them also all the canals, and almost all the
roads, which, by obviatiu< in a great measure the accidents of situation,
enable the amount of labonr to hear throughout the Kingdom some-
_hing like an avera;ze proportion to the quality of the soil on which
it is employed. It is possible, though certainly not prob._ble, that
our progress may be equal during the next hundred years; but though
indefinite, it certainly cam_ot be infinite. It is obviously impossible that
the produce of the soil of a given district can increase geometrically
for ever. whatever be the amount of the labour employed on it.
On the other band, every increase in the number of manufacturin_
labourers is accompanied not merely by a corresponding, but by an
increased productive power. If three hundred thousand families are
nosy employed in Great Britain to manufacture and trar.sport two
h,mdred and forty millions of pounds ot cotton, it is absolutely certain
that six hundred thousand families could manufacture and transport
four hundred and eighty millions of pounds of'cotton. It is, in fact,
certain that they could do much more. It is not improbable that
they could manufacture and transport seven hundred and twenty
miliions. The only check by which we can predict that the progress
of our manufactures will in time be retarded, is the increasing difficulty
of importing materials and food. If the importation of raw produce
could keep pace with the power of working it up, there would be no
limit to the increase of wealth and population.
DISTltIBVTION OF WEALTH.
two great branches. The one comprises those laws which apply
generally to all Exchanges; the other those which apply specifically
to the respective kinds of Exchanges in which the owners of the dif-
ferent Productive Instruments exchange specifically with one another
the Produce of those Instruments.
In treating of the one, we have to consider the general laws which
regulate Exchanges; in treating of the other, the relative pr_por-
tion_ in which different classes of the community benefit by those
laws. The things exchanged will be the principal subjects of the one
di._cussion, the exchanging parties of the other.
One of the greatest di_eult]es to which a writer on Political
Economy is exposed, arises from the mutual dependence of the
different propositions constituting the Science; a dependence which
makes it difficult to explain any one without a frequent allusion to
many others. And this is particularly the case with respect to distri-
bution. The proportions in which different classes of the community
are entitled to the things that arc produced, cannot be explained
without a constant reference to the general Laws of Exchange ; and,
on the other hand, those Laws cannot be discussed without a constant
reference to the exchanging parties. Admitting, as we are fo_'ced to
do, that no arrangement can be free from objection, we have thought
that the least objectionable mode of presenting the subject of distribu-
tion will be to begin by a general classification of the parties among
whom the results of the different instruments of production aro
divided; then to proceed to state the general taws of exchange; and,
lastly, to point out the general circumstances which decide in what
proportions the different classes of the community share in the general
distribution.
_OCIETYDIVIDEDINTOT_I[_EE(]LASSES--L_BoURERS,CAPIT.4LISTS,AND
._ROP[_IETORS
OF _ATURALAGENTS.
ing or exercising it, and a name for the Share of the produce by
which that act is remunerated. Of these terms we have not much
more than half, as will appear if we examine each class separately.
Nomenclature applicable to the First Cla_s, the iabonrers.--_or the
first class we have the terms "to Labour," "a Labourer," and
r ,,
" _ a_es. Neither of these terms expresses the instruments of
production: the substantive "labour'" and the verb " to labour,"
express merely an act. " A labourer," is an agent, and wages are
a result : but what is the thing employed ._ what is it that the labourer
exerts ._ Clearly his mental or bodily faculties. With the addition
of this term the nomenclature of the first class _ill be complete. To
Labour is to employ strength of body or mind for the purpose of Pro-
duction; the person who does so is a Labourer, arid Wages are his
remuneration.
Nomenclatu_ npplicable to the _iccoud Cht_, the Capilalis_.--[H
the second class we have the words Capital, Capitalist, and Profit.
These terms express the instrument, the person who employs or
exercises it, and his remuneration; but there is no familiar term to
express the act, the conduct of which profit is the reward, and which
bears the same relation to profit which labour does to wages. To
this conduct we have already given the name of Abstinence. The
addition of this term will complete the nomenclature of the secund
class. Capital is an article of wealth, the result of human exertion,
employed in the production or distribution of Wealth. Abstinence
expresses both the act of abstaining from the unproductive use of
capital, and also the similar conduct of the man who devotes his
labour to the production of remote rather than of immediate results.
The person who so acts is a Capitalist, the reward of his conduct is
Profit.
Nomenclature applicable to the Third flus, the proprietors of
is the mode of letting land called the mftayer system. Under that
system, which is still common on the Continent of Europe, and probably
is always to be found in a certain state of society, the la_ldlord supplies
tile capital as well as the land, and receives half the crop, the remainder
forming the wages of the tenant or head labourer, and of the iuferiev
work-people in his employ. But these are exceptions occasioned by
the peculiarities of tim adventure, or by tlle poverty or ignorance of
imperfect civilization. The usual practice is to consider one of the
parties as entitled to tile whole product, paying to the others a price
for their co-operati,m. The person so entitled is uniforndy the
c'q)italist : the sums which he pays for wages and rent are the pur-
chase-money for the services of the labourer, and for the use of the
natural agent employed.
In most cases a considerable interval elapses between the period
at which the natural agent and the b_bourer are first employed, and
the completion of the product. In this climate the harvest is seldom
reaped until nearly a year after it has been sown; a still ]on_er time is
required for the "maturity of oxen; and a longer still for that of a
horse; and sixty or seventy years may pass between the commence-
meter of a plantation, and the time at which the timber is saleable.
It is obvious that neither the landlord nor the labourer, as such, can
wait during all this interval for their remuneration. The doing so
would, in f_ct, be an act of abstinence. It would be the employ-
ment of land and labour in order to obtain remote results. This
sacrifice is made by the capitalist, and he is repaid for it by his
appropriate remuneration, profit. He advances to the landlord and
tile labourer, and in most cases to some previous capitalist, the price
of their respective assistance; or, in other words the hire of the
land and capital belonging to one, and of the mental and bodily powers
of another, and becomes solely entitled to the whole of the product.
The success of his operations depends on the proportion which the
value of that produce, (or, in commercial language, the value of his
returns,) bears to the value of his advances, taking into consideration
the time for which those advances have been made. If the value of
the return is inferior to that of the advance, he is obviously a loser;
he is a loser if it be merely equal, as he has incurred abstinence
without profit, or, in ordinary language, has lost the interest on his
capital. He is a loser even if tile value of his returns do not exceed
that of his advances by an amount equal to the current rate of profit
for the period during which the advance has been made. In any of
these eases the product is sold, so far as the capitalist is concerned,
for less than the cost of its production. The employment of capital,
ther_ore, is necessarily a speculation; it is the purchase of so much
productive power which may or may not occasion a remunerati,-e
return.
The common language of Economists, therefore, which describes
34 PROPRIETORS OF NATURAL AGENTS.
tile landlord, the capitalist, and the labourer as sharers of the produce,
is a fiction. Almost all that is produced is in the first instance tlw
property of the capitalist; he has purchased it by having previously
paid the rent and wages, and incurred or paid for the abstinence,
which were necessary to its production. A portion of it, but generally
a small portion, he consumes himself in the state in which he receives
it; the remainder he sells. He may, if lie think fit, employ the
price of all that he sells in purchases for his own gratification: but
he cannot remain a capitalist unless he consent to employ some portion
of it in the hire of the land and labour, by the assistance of which
the process of production is to be continued or reeommenced, tie
cannot, generally speaking, fully retain his situation as a capitalist
unless he employ enough to hire as much land and labour as before;
and if lie wish to raise himself in the world, tie must, generally
speaking, not merely keep up, but increase the sum which he devotes
to the purchase of productive force. If, for instance, he has hired
the use of a farm for a year for £1000. and has paid £2000 more as
wages to his labourers, and ha_ expended £10(_0 in the purchase,
from other capitalists, of Agrieuhural stock, and at the end of the
year has sold the produce for £4400, he may, if he like, spend on
lfis ewn _ratification the whole of that. £4400; or he may so spend
only £400, and employ the rest in hiring the farm and the labourers,
and purchasing stock fbr another year; or he may spend on himself
only £200, and by employing productively £4200 instead of .£4000,
hire more land, or more labourers, or parchase more stock and pro_'ide
for the increase of his capital and his profit. But in whatever way
lie employ his £4400, tie still must pay it to landlords, (using that
word to comprise all proprietors of natural agents,) capitalists, and
labourers.
It has been objected, however, that this nomenclature is incomplete.
Rent, profit, and wages, it has been said, designate only those portions
of the annual produce which the producers consume for their own
gratification. They form the revenue of a nation. A further portion
and a very large one, must be employed, not as revenue, but as capital:
not in directly supplying the wants or directly ministering to the
enjoyments of either landlords, labourers, or capitalists, but merely
in keeping up the instruments of production. Thus of the farmer's
whole return, which we have supposed to be of the value of £4400,
we may suppose a portion, amounting in value to £°00, to have con-
sisted of corn which he returned to the earth as seed, and another
portion amounting to the same value, to have consisted of' the forage
which lie gave to his working cattle. It has been said that neither
this seed nor this forage was rent, profit, or wages.
The answer to this objection is, that the seed-corn and forage in
question were the result of land, labour, and abstinence; they were
entitled, therefore, when produced, to be denominated rent, wages,
EXCHANGE. 96
supply and occasion the utility of the other. The causes which occa-
sion the utility and limit the supply of any given commodity or service,
we denominated the ivdrlnsic causes of its value. Those which limit
the supply and occasion the utility of the commodities or services for
which it is capable of being exchanged, we denominated the extrinsic
causes of its value. And, tlnrdly, that comparative limitation oi
supply, or, to speak more familiarly, though less philosophically,
compaiatlve scarcity, though not sui_cient to constitute value, is by
far its most important element; utility, or, in other words, demand,
beih_ mainly dependent on it. We had nut then shown the means
by which supply is effectcd. Having done this, having shown that
human Labour and Ai)_-tinence, and tile spontaneous agency of Nature,
are the three instruments of production, we are at liberty to explain
what are the obstacles which limit the supply of all that ,s produced,
and the mode in which those obstacles affect the reciprocal values of
the different subjects of exchange.
rrie,..--In the following discussion, however, we shall in general
substitute price, or v,,lue in mo,_ey, for general value.
The general value of any commodity, that is, the quantity of all the
other subjects of exchange which might be obtained in return for a
given quantity of it, is incapable of being ascertained. Its specific
value in any other commodity may be ascertained by the experiment
,if an exchange; the anxiety of each party in the exchange to give as
little and obtain as nmch as possible, leading him to investigate, as
accurately as he can, the intrinsic causes giving value to each of the
articles to be exchanged. This is, however, a troublesome operation,
and many expedients are used to diminish its frequency. The most
obvious one is to consider a single exchange, or the mean of a few
exchanges, as a model for subsequent exchanges of a similar nature.
By an extension of this expedient it may become a model for exchanges
not of a similar natm'e. If given quantities of two different articles
are each found by experience to exchange for a given quantity of a
third article, ti_e proportionate value of the two first-mentioned articles
may, of course, be inferred. It is measured by the third. Hence
arise the advantages of selecting, as one of the subjects of every
exchange, a single commodity, or, more correctly, a species of com-
modities constituted of individuals of precisely similar qualities. In
the first place, all persons can ascertain, with tolerable accuracy, the
intrinsic causes which give value to the selected commodity, so that.
one half the trouble of an exchange is ready performed. And, secondly,
if an exchange is to be effected between any other two commodities,
the quantity of each that is usually exchanged for a given quantity of
the third commodity is ascertained, and their relative value is inferred.
The commodity thus selected as the general instrumemt of exchange,
whatever be its substance, whether salt, as in Abyssinia, cowries, as on
the Coast of Guinea, or the precious metals, as in Europe, ia money.
PRICE. 97
When the use of such a commodity, or, in other words, of money, has
become established, value in money, or 2_'rice, is the only value fami-
liarly contemplated. The scarcity and durability of gold and silver
(the substances used as money by all civilized nations) make them
peculiarly unsusceptible of alteration in value from intrinsic causes.
On these accounts we think it better, in the following discussion, to
refer rather to pr/ce than to general value, and to consider the value
of money, so far as it depends on intrinsic causes, to be unvarying.
We must preface our explanation of the effect on price of the
causes limiting supply, by a remark which may appear self-evident,
but which must always be kept in recollection, namely, that where the
only natural agents emplo//ed are those which are universally accessible,
and therefore are practically un[imYed in suppty, tile utility of the
produce, or, in other words, its power, directly or indirectly, of pro-
ducing gratification, or pre_'enting pain, must be in proportion to the
sacrifices made to produce it, wdcss the producer has misal_plied hls
exertions; since no man would willingly employ a given a_wunt of
labour or abstinence in producing one commodity, if he could obtain
more gratific_ion by dcvoti_g them to the production of another.
We now revert to the causes which limit supply.
There are some commodities the results of agents no longer in
existence, or acting at remote and uncertain periods, the supply of
which cannot be increased, or cannot be reckoned upon. Antiques
and relics belong to the first class, and all the very rare productions
of Nature or Art, such as diamonds of extraordinary size, or pictures,
or statues of extraordinary beauty, to the second. The values of
such commodities are subject to no definite rules, and depend altogether
on the wealth and taste of the community. In common language,
they are said to bear a fancy price, that is, a price depending princi-
pally on the caprice or fashion of the day. The Boccaccio, which a
few years ago sold for £2000, and after a year or two's interval for
£70(), may, perhaps, fifty years hence, be purchased for a shilling.
Relics which, in the ninth century, were thought too valuable to
admit of a definite price, would now be thought equally incapable of
price in consequence of their utter worthlessness. In the following
discussion we shall altogether omit such commodities, and confine our
attention to those of which the supply is capable of increase, either
regular, or sufficiently approaching to regularity, to admit of cal-
culation.
The obstacle to the supply of those commodities which are pro-
duced by labour and abstinence with that assistance only from
nature which every one can command, consists solely in the difficulty
of finding persons ready to submit to the labour and abstinence
necessary t_) their production. In other words, their supply is
limited by the cost of their production.
• _ et"l_roduction.--The term "cost of production" must be
II
98 COSTOF PRODUCTION.
ciple is that, though in both cases the labour employed is the same,
more abstinence is necessary in the one case than in the other.
['o_t of l_ueUo_ Defmed.--By Cbst of_Production, then, we mean
the sum of the labour and abstinence necessary to production. :But
Cost of Production, thus defined, must be divided into the cost of
production on the part of the producer or seller, and the cost of pro-
duction on the part of the consumer or purchaser. The first is of
course the amount of the labour and abstinence which must be under-
gone by him who offers for sale a given class of commodities or services
m order to enable him to continue to produce them. The second is,
the amount of the labour and abstinence which must be undergone by
those to whom a given commodity or service is offered for sale, if,
instead of purchasing, they themselves, or some of them on the behalf
of themselves and the others, were to produce it. The i_rst is equal
to the minimum, the second to the maximum, of price. :For, on the
one lmnd, no man would continue to produce, for the purpose of sale,
what should sell for less than it cost him to produce it. And, on the
edger hand, no men would continue to buy wlmt they themselves, or
some of them on the behalf of themselves'and the others, c_)uld pro-
duce at less expense. With respect to those commodities, o_. to
speak more accurately, with respect to the value of those p_'-ts or
attributes of commodities, which are the subjects of eqnal eomp_titlon,
which may be produced by all persons with equal advantages, the
cost of production to the producer and the cust of production to the
consumer are the same. Their price, therefore, represents the aggre-
gate amount of the labour and abstinence necessary to continue their
production. ]f their price should fall lower, the wages or the profits
of those employed in their production must fall below the average
remuneration of the labour and abstinence that must be undergone
if their production is to be continued. ]n time, therefore, it is dis-
continued or diminished, until the value of the product has been
raised by the diminution of the supply. If the price should rise
beyond the cost of their production, the producers must receive more
than an average remuneration for their sacrifices. As soon as this
has been discovered, capital and industry fiow towards the employ-
ment which, by this supposition, offers extraordinary advantages.
Those who formerly were purchasers, or persons on their behalf, turn
producers themselves, until the increased supply has equalized the
price with the cost of production.
Some years ago London depended for water on the New River
Company. As the quantity which they can supply is limited, the
pric_s rose with the extension of buildings, until it so far exceeded the
cost of production as to induce some of the consumers to become
prodtmera. Three new Water Companies were established, and the
price fell as the supply increased, until the shares in the New River
Company fell to nearly one-fourth of their former value; from £15,000
102 COST OF I_RODUCTIO_.
The effect will be the same whether we select for the scene a con-
tinent or an island; a district containing soils of every degree of
fertility, or of precisely uniform quality. The Anglo-Americans have
supplied their constantly increasing wants chiefly by spreading them-
selves backwards over their unbounded Western territory, and have
made little use of inferior soils, or of high cultivation, except in the
immediate vicinity of their cities. In Malts, a single acre receives
more labour than would be devoted to a square mile in the Illinois ;
but precisely the same motives impel the Maltese to terrace his moun-
tains into gardens, and the American to reclaim the prairies of the
3iissouri.
It may be inferred, from the picture which we have given of the
progress of society, that we believe an increased difficulty of obtaining
raw produce to be the natural incident to an increase of population.
In the absence of counteracting causes it certainly would be so; but
those causes are so powerful, that, unless checked by legislation,
they in many respects balance the causes which we have been con-
sidering. In a colony, the counteracting causes appear likely to
preponderate for a period, the duration of which must of course
depend in part on the quantity of fertile and unoccupied land in its
vicinity. As the circle of appropriated land expands, and the expense
of bringing food to the consumers becomes more oppressive, there is
a tendency in the consumers to follow the food. The colonial capital,
now turned into a metropolis, may continue to send out portion after
portion of her increased inhabitants, until the whole territory acquires
something approaching to an average amount of cultivation. Again,
in every Country increased wealth and numbers are accompanied by
increased agricultural skill and improved means of transport. The
use of implements, the division of labour, and physical knowledge are
po_erful aids to the agriculturist, though they do not afford to him
the almost msgical increase of power which they give to the manu-
facturer. The improvements in carriage arc still more important: a
given amount of labour applied for twenty years to a given piece of
land, would probably now produce a return four or five times as great
as would have been obtained at the Conquest. But the labour
necessary to transport that produce one hundred miles is probably
now not one one-hundredth of what it was then. No improvements in
husbandry instruments, or in breeding, or in the rotation of crops,
have been so efficient as the substitution of the waggon, the Mac-
adamized road, the canal, the navigable river, and the railway, for
the pack-horse of our ancestors and the dangerous tracks through
which they beat out and picked their way. The intervention of a
hill or a morass was then an obstacle sufficient to allow the price of
corn on one side to be double that on the other ; and London was so
dependent on the immediately adjacent Counties, that the landlords
of those Counties petitioned against the opening of roads, as inter-
MONOPOLY OF LAND. 109
able when compared with the general mass, is produced by labour and
abstinence, assisted only by those natural agents which are universally
accessible. It is difficult, however, to point out an article, however
simple, that can be exposed to sale without the concurrence, direct or
indirect, of many hundred, or, more frequently, "of many thousand
different producers ; almost every one of whom will be found to have
been aided by some monopolized agent.
There arc few things of which the price seems to consist more
exclusively of wages and profits than a watch ;2_but if we trace it
from the mine to the pocket of the purchaser, we shall be struck by
the payment of rent (the invariable sign of the agency of some instru-
ment not universally accessible) at every stage of its progress. Rent
was paid for the privilege of extracting from the mines the metals of
which it is composed ; for the land which afforded the materials of the
ships in which those metals were transported to an English port ; for
the wharfs at which they were landed, and the warehouses where they
were exposed to sale; the watchmaker pays a rent for the land
covered by his manufactories, and the retailer for that on which his
shop is situated. The miner, the shipwrlght, the house-builder, and
the watchmaker, all use implements formed of materials produced by
the same processes as the materials of the watch, and subject also in
their different stages to similar payments of rent. The whole amount
of all these different payments forms probably a very small portion
of the value of the watch ; but if we were to attempt to enumerate
them, they would be found subdivided into ramifications too minute for
calculation. What remains consists of the wages of the workmen,
and the profits of the capitalists who paid those wages in advance.
The attempt to trace hack these wages and profits to their earliest
beginnings, would be as vain as the attempt to enumerate all the pay-
ments of rent. In estimating, therefore, the value of a manufactured
commodity, we scldom go farther back than to the price paid by the
manufacturer for his materials and implements, a price which must
have included all previous payments of rent, wages, and profits.
We will now trace the causes which increase the value of those
materials after they have been the property of the manufacturer. We
will suppose a watchmaker's capital to consist of materials worth £500,
that he has bought the land covered by his buildings for _500, and
has expended £900 in erecting them, that his tools have cost him
:£100, and that an annual expense of £100 is necessary to keep his
buildings and tools in repair. We will suppose him to employ ten
workmen, each receiving at an average £100 a-year, and that one
year is the average period from the commencement to the sale of a
watch. We will suppose that his ten workmen can annually convert
his £500 worth of materials into five hundred watches, and that the
_1It has been used by M. Canard,M. Flores Estrada, and Mr. M'Cutloch,as an
example ofthevalue derivedfromlabour alone.
EFFECTS OF COST OF PRODUCTIONON PRICE. 113
average rate of profit in his business amounts to ten per centum per
annum. To give him this profit it is clear that his watches must sell
for
Value of materials ........................................... £500
Wages for a year ............................... 1000
Repairs for a year,. .......................................... 100
1600
Profit on the advance of these sums, and on the')
value of the land, and buildings, and tools, for_ 155
half-a-year, at 10 per cent. pe_"annum .......... .)
£1755
And it is equally clear that no rent can be paid by the farmer for
the privilege of producing the last thirty-three one-third quarters, as
the whole £100 for which it sells is absorbed by the cost of produc-
tion. The last thirty-three one-third quarters will continue to be
produced as long as the wants and the wealth of the purchasers render
them willing and able to purchase a quantity of corn, the whole of
which cannot be supplied unless this last and most expensive portion
is produced. If those wants and wealth should increase, it might
become necessary to raise an additional supply at a still further addi-
tional expense, at the cost, we will say, of £100 for only twenty
quarters. But it is clear that this could not be done unless the price
should be £5 a quarter, since that is the lowest price at which the
cost of producing the last supply would be repaid. The price, indeed,
would probably have previously risen to above £5 a quarter, since an
interval must have elapsed between the increased demand occasioned
by the increased wants and wealth of the purchasers and the increase
of the supply. During that interval the price must hax'e risen some-
what above the price at which it would settle when the additional
supply had been obtained. The appearance of that additional supply
would sink it to £5 a quarter, the cast at which that supply is pro-
duced, but it could not permanently fall bel,)w that price unless a
diminution should take place either iu the wants or wealth of the
purchasers, or in the expenses of cultivation or conveyance.
All this appears almost too plain for formal statement. It is,
however, one of the most recent discoveries in Political Science : so
recent that it can scarcely be said to be universally admitted even in
this Country, and abroad it does not seem to be even comprehended.
If any writer could be expected to be fully master of i_, it would be
Say, file most distinguished of tlle Continental Economists, and the
annotator oa Rieardo. In his notes to the French translation of the
Principles of Politica! ]JcoJ_o_n.,ia_cl Taxation, lie constantly objects
to Mr. Ricardo's 1Leasonlngs, the fact that all cultivated land pays
rent; as if such a fact were inconsistent with the existence of corn
raised without the payment of rent. He repeats this objection in a
note to a passage in which IIicardo has demonstrated its falsity. In
the twenty-fourth chapter of the 2Prb_ciples, Mr. Ricardo examines
Adam Smith's opinions on rent.
"Adam Smith," observes _[r. t_icardo, "had adopted the notion
that there were some parts of the produce of land for which the
demand must always be such as to afford a greater price than what
is sufficient to bring them to market; and he considered food as one
of those parts.
" lie says that 'land in almost every situation produces a greater
quantity of food than what is sufficient to mqintain all the labour
necessary fbr bringing it to market, in the most liberal way in which
•about is ever maiI_tained. The surplus, too, is always more than
rest. 117
cotton fit for lace-making to raise its price from 2s. to 4s. a pound ;
the price of the lace, supposing it still to be manufactured at the
same expense, would be raised one thousand-and-fiftieth part, or from
£105 to £105 2s. But it is impossible to doubt that the stimulus
thus applied to the production of lace would improve every process of
the manufacture. We should probably much underrate the amount
of that improvement if we were to estimate the consequent saving of
expense at one-fourth ; in which case the whole result of the increased
production would be that the lace would sell for £78 17s. instead of
.£105; the same circumstances which would nearly double the price of
bread would reduce by one-fourth the price of lace.
only one quarter per acre. We will suppose, also, that the wages
of ten men for a year amount at an average to .£400, or £40 a
man ; that the farmer has to advance these wages for a year before
the produce is sold ; and that the average rate of profit in similar
occupations, is ten per cent. per annum. Under such circumstances,
when wheat was ._2 4s. a quarter it would be worth his while to
employ every man whose labour produced twenty quarters, the price
of which would amount to £44, being £40 for the labourer's wages,
and £¢ for the farmer's profit. The forty men supposed to be
employed on the four best qualities of soil produce each this amount
and more ; the ten men employed on the fifth quality of soil produce
each precisely this amount, namely, a return of two hundred quarters,
worth £440. The sixth and last quality of soil, on which one man
could produce only ten quarters, would not repay the cultivation of
wheat. :Now, if a tax were laid on raw produce, which, to make the
illustrations less complex, we will call a tax of 14s. Sd. on every
quarter of wheat, and no rise of price should take place, it is obvious
that it would no longer be wurth his while to cultivate any land of
worae quality than that in which the labour of ten men could l_roduce
three hundred quarters of corn ; a return which, at the existin_ price
of ,£2 4s. a quarter, would procure £G60, being £220 for the ta_,
and £440 as before for wages and profits. But it would obviously"
be worth his while to cultivate land of that quality, and also to
employ labour in the cultivation of his superior land up to the point
at which the labour of an additional man would no longer produce an
additional product of thirty quarters. :Nothing but a tax so great as
absolutely to prohibit agriculture, such a tax as never has existed,
and which would, in fact, be ratl_er a penalty than a tax, could
induce him to discharge all his labourers, and leave his best land
uncultivated. We do not deny tha_ he would be a loser, even
by the conduct which we have supposed him to adopt. We do not
deny that he would much have preferred a rise in the price of corn
equal to tile tax,--a rise which would have enabled him to continue
in its existing investment all his agricultural capital. But we deny
that any imposition to which the name of a tax can fairly be applied,
though unaccompanied by a rise of price, would induce him altogether
to discontinue production. And we wish to draw the attention of our
readers to the contrast between his situation and that of the manu-
facturer, whom any tax, however slight, if unaccompanied by a rise
of price, must in time force to discontinue manufacturing. What is
a remedy to the agriculturist is an aggravation of evil to the manu-
facturer ; a diminution of capital makes what remains in agriculture
more productive, and makes what remains in manufactures less so.
It has been supposed, however, that the price of agricultural pro-
duce would rise to the full amount of the tax, and that the whole
amount of that tax would consequently fall on the consumer. This
EFFECT OF TAXATION ON AGRICULTURAL PRODUCE. ]23
that fertility bears to the number and wealth of the existing inhabi-
tants. It may be low in a barren territory, if that territory be
thinly peopled, just as it may be high in a fertile and populous one.
It is high in the rich Lowlands of Scotland, and low in the sandy
plains of Poland. And it will also be admitted that, all other things
remaining the same. the population of a Country is in proportion to
its extent and its fertility. :Now, the ultimate effect of tithes, or of
any other tax, on the cultivation of land, is precisely the same as if
the Country in which they have long prevailed was thereby rendered
rather less extensive, or rather less fertile, and, consequentl3, rather
less populous, and probably also rather poorer than it otherwise
would have been.
'rithe,.--If England, from time immemorial, had been rather more
extensive, or rather more fertile than it now is, no one will suppose
that the price of provisions would have been lower than it now is.
We should have had rather more corn, and a rather greater popula-
tion to eat that corn, than we now have. The increase would have
been positive, not relative. So if Devonshire or Lincolnshire had
never existed, the agricultural produce and the population of England
would each have been positively diminished ; but, as they would have
berne the same proportion to one another as they do now, the price
of the existinz quantity of corn could not have been higher than it is
now. So if tithes had never existed, we should have had rather
more corn and a rather lar_er and probably a rather richer popula-
tion ; every thing else would have been as i_ is. It is true that, if a
new Devonshire, or a new Lincolnshire_ fit for immediate cultivation,
were now suddenly added to our shores, the immediate consequences
would be an increased supply of provisions, and a fall in their price.
But it is also true that, if this accession to our territory were followed
by no change in our hahits and institutions, the comparative cheap-
ness, which would be its immediate consequence, would gradually
disappear as our population rose with the increased supply of subsis-
tence, and, ultimately, we should be just where we are now, excepting
that we should be rather more numerous. So, if tithes were suddenly
commuted, and their interference, such as it is, with agricultural
improvement, got rid of, the same consequences would follow as if the
extent of our territory, or its fertility, were suddenly aug'mented. And,
supposing no improvement to take place in our institutions and habits,
the consequent increase of our population would bring us back, as far
as the price of provisions is concerned, to the point at which we are now.
It is probable, indeed, that the ultimate effect of the abolition of
tithes would be not a lowering but an increase of the price of raw
produce. A denser population cultivating a territory, the produo-
tiveness of which had increased in proportion to the increased number
of its inhabitants, would probably advance in opulenoe. The pro-
ductiveness of the soil of a Country in proportion to its population
TITHES. 105
bein_ given, or, in other words, the amount of raw produce and the
number of people being ascertained, the smaller the extent of the
land from which that amount is obtained the better. The expenses of
transport, and the trouble and loss of time in journeys, are material
elements of the cost of production both in agriculture and in manu-
factures, and the amomlt of these expenses depends principally on
the extent of Country affording a given return. As our industry
became more efficient the value of our labour would rise in the
general market of the world, and the consequence would be a general
rise of prices, in which a_ricultural produce would participate. B_lt
these statements form no part of our argument. We believe, indeed,
that the ultimate effect of tithes is to lower the price of raw produce :
but all that we have undertaken to show is, that they do not raise it.
From these premises follow very important practical inferer, ces. If
we lay a tax on tile production at home of any manufactured com-
modity which is produced with the same, or nearly the same, facdity
abroad, it is absolutely necessary that a duty of the same, or a rather
ffrea_er amount, should be imposed on the importation of that commo-
di:v. On the imposition of the tax the cost of production at home is
increased, first by the tax, and, secondly, by the i_creascd expense of
producing the sn_aller quanthy which, wilen the price becomes higher,
continues to be dema_,ded. But if importation were untaxed, the
cost of production abroad would be dimiifished in consequence of ti_e
dimini.q_cd prop,rti,_nate c::pense of producing the larger quantity
demanded. The domestic prodt'etion, and with the domestic _roduc-
tiou the tax. would not be mere b dimini,-_hed, but absolutet_- destroyed,
and the whole result would be gratuitous evil. But when a tax,
unbalanced by any countervailing duty on im?ortation, is imposed on
any agricultural produce for which a foreia'n substitute can be obtained,
the only result is to stop that porthm, width i.__nost e,cpe_._ivc of the
domestic production. The least productive part of the existing agri-
cultural capicd is withdrawn, or worn nut without being replaced.
The deficiency is attempted to be supplied by importation; but the
increased demand, instead of lowering, as would be die case with
manufactures, raises the cost of production abroad, just as the dimin-
ished demand, instead of raising, lowers the cost of production at
home. Tt_e price of agricultural in'educe rises until the state of the
popuhaion has accommodated itself to the change, and then falls to
its ft,rmer level. ]f our present heavy tax on the domestic produ_.tiou
of glass were unbalanced by any duty ou importation, all the English
glass-works would in time be abandoned. Or, if some of our gl._ss-
works were free from the tax, and others subjet.t to it, all those which
were taxed would be ruined. But the lands in England which are
subject to the payment of tithes are not thrown out of cultivation by
the competition of those which are free fl'om that burden, or by the
importation of the tithe-free corn and cattle of Scotland, or of the
126 TITHES.
We see too why the attempt to endow with lands the Canadian Church
has so signally failed. Tithes would not, perhaps, have been a politic,
but they would have been all actual endowment. The reserves stand
so many desert spots in the midst of improvements retarding the
settlement, interrupting the communications, and injuring the wealth
and civibzation of all that is rom,d them. Five centuries hence they
might afford an ample provision.
I_ELATIVE PROPORTIONS OF RENT, PROFIT_ AND WAGES.
him if it implied the slightest risk ; and the best pledge which he can
give is the notoriety of his possessing a largo capital, which could at
any time make good an unforeseen interruption in his regular receipts.
This capital he must not waste, but he may employ it productively,
and may consume on himself the annual profit derived from it. The
confidence which it enables him to enjoy is a distinct advantage.
We will suppose a bill-broker to possess £100,000, in the Four per
Cents.; and to have suflieient knowledge, skill, and character as a
man of business and of wealth, to be able, at, an average throughout
the year, to borrow £400,000 at two per cent., and to lend the same
sum at three per cent. Is the £4000 a-year which his business
would give him wages or profit ?
Again, a capital which in this Country would enable its employer to
obtain ten per cent., would often, if he were to employ it in Jamaica
or Calcutta, produce fifteen or twenty. If the capitalist with £50,000
encounter the climate and the society of Jamaica, and is rewarded by
his annual returns being raised from £5000 to £7500, is his additional
income of £2500 a-year wages o1"profit ?
There is no doul_t that a sufiieient portion of it to purchase the
same services fi'om a person unpro)'ided with capital, must be con-
sidered as w'/ges: _St) a-year, however, would considerably exceed
this sum. The remaining £2000 a-year may be considered, with
equal correctness, either wages which can be received only by the
possessor of £500,000, or profit which can be received only bv a person
willing to labour in Jamaica.
Adam Smith considers it as profit. "The profits of stock," he
observes, -°-_" it may, perlmps, be thought, are only a different name
for the wages of a particular sort of labour, the labour of inspection
or direction. They are, however, altogether different, are regulated
by quite different principles, and bear no proportion to the quantity,
the hardship, or the ingenuity of this supposed labour of inspection
and direction. They are regulated altogether by the value of the
stock employed, and are greater or smaller in proportion to this
stock. If we suppose two manufacturers, the one employing a capital
of £1000, and the other one of £7300, in a place where the common
profits of manufacturing stock are ten per cent., the one will expect
a profit of about ._100 a-year, while the other will expect about £730.
Yet their labour of inspection may be very nearly or altogether the
same. In many great works, almost the whole labom" of this kind is
committed to some principal clerk. His wages properly express the
value of this labour of inspection and direction. Though in settling
them some regard is commonly had, not only to his labour and skill,
bu: to the trust which is reposed in him, yet they never bear any
regular proportion to the capital of which he oversees the manage-
the most important of all appropriated natural agents, sells for a price
exceeding the expense of its cultivation. This excess of price, or
produit net, as they termed it, they conceived to be die only source of
wealth. All other commodities appeared to them merely to represen:
the toil employed in their acquisition. They believed, therefore, a
community to be rich ill proportion to the anaount of rent received by
the proprietors of its land; and consequently that production enriches
only so far as it is subservient to the creation of rent.
It is impossible that they could have maintained this doctrine, if
they had perceived that abundance is an element in wealth, and that
high rents and the greatest abundance are incompatible; or if they
had recollected that, according' _o their views, a community possessing
the highest skill and exerting the utmost diligence, but scattered over
a territory of unbounded extent and fertility, as they might be even
unacquainted wid_ the existence of such a thing as rent, must be
totally without riches, must be poor from the mere prodigality of their
resources,
In the following passage Mr. Iticardo seems to have fallen into an
orposite error :--
•' Nothing is more common than to hear of the advantages which
the land possesses over ever), other source of useful produce, on account
of the surplus which it yields in the _brm of rent. Yet when land is
most abundant, when most prodnetlve, and most fertile, it yields no
rent: and it is only when its powers decay, and less is yielded in return
tbr labour, that a share of the original produce of the more fertile
portions is set apart for rent. It is singular that this quality in the
land, which should have been noticed as an imperfection, compared
with the natural agents by which manufactures are assisted, should
have been pointed out as constituting its peculiar pre-eminence. If
air, water, the elasticity of steam, and the pressure of the atmosphere,
were of various qualities, if they could have been appropriated, and
each quality existed only in moderate abundance, they, as well as the
land, would afford a rent, as the successive qualities were brought into
use. With every worse quality employed, the value of the commo-
dities in the manufacture of which they were used would rise, becauso
equal quantities of labour would be less productive. Man would do
more with the sweat of his brow, and nature would perform less ; and
the land would be no longer pre.eminent for its limited powers.
" If the surplus produce which the land affords in the form of rent
be an advantage, it is desirable that every year the machinery newly
constructed should be less efficient than the old, as that would
undoubtedly give a greater exchangeable value to the goods manufac-
tured, not only by that machinery, but by all other machinery in the
Kingdom; and a rent would be paid to all those who possessed the
most productive machinery.
" The labour of nature is paid not because she does much, but
138 PROPORTIONATEAMOUNTOF RENT.
were the most important, instead of being the least important, incident
to wages, it still would be inconvenient, from its tendency to render
the writer who employs it both inconsistent and obscure. It is almost
impossible to affix to terms of familiar use a perfectly new meaning,
and not from time to time to slide into the old one. When Mr.
Ricardo says that " nothing can affect profits but a rise of wages,"
p. 118 ; that " whatever raises the wages of labour lowers the profits
of stock," p. 231 ; that "bigh wages invariably affect the employer_
of labour by depriving them of a portion of their real profits," p.
129 ; that, "as the wages of labour fall the profits of stock rise,"
p. 499 ; he means by high wages, not a large amount, but a large
"proporti_)n. But when he speaks of tbe" encouragement which high
wages give to the increase of population," pp. 88--3G1, he means by
high wages a large amount. And many of his followers and oppo-
nents have supposed the words high and low to be used by him as
indicative of quantity, not proportion. The consequence has been
that, since the publication of his great Work, an opinion has prevailed
that high wages and high profits are incompatible, and that whatever
is taken from the one is added to the other. The slightest attempt
to try this theory by an actual example will show its absurdity. The
usual supposition is, that the capitalist, at an average, advances the
wages of his labourers for one year, and receives, after deducting
rent, one-tenth of the value of what they produce. We are inclined
to think that in England the average rate of profit is rather greater,
and the average period of advance rather less. After making many
inquiries on these subjects in Manchester, we found the general
opinion to be, that the manufacturing capitalist turns his capital, at
an average, twice in the year. and receives on each operation a profit
of 5 per cent. ; and that the shopkeeper, at an average, turns his
capital four times in a year, and receives on each operation a profit of
about 3_ per cent. On these data the labourer's share would, of course,
be much greater than according to the ordinary estimate. We will
suppose, however, that estimate to be correct, and that, after rent has
been deducted, the labourer receives, on an average, nine-tenths of
the value of what he produces. Under these circumstances a rise in
the amount of wages amounting to one-tenth, or item 10s. to lls.
a-week, if that rise is to be deducted from the capitalist's share, would
utterly destroy all profit whatever. A rise of one-fifth, or from 10s.
to 12a. a-week, would occasion to the capitalist a loss equal to the
whole amount of his former profit. A fall in wages of one-tenth
would double profits ; a fall of one-fifth would treble them. Now we
know that general variations in the amount of wages to the amount
of one-tenth or one-fifth, or to a greater extent, are not of unfrequent
occurrence. Yet who ever heard of their producing such an effect on
profits ?
And yet this doctrine has received the sanction both of theoretic
144 AVERAGE RATE OF _3,L_.GES.
Sessionof 1824.
AVERAGE tlATE OF WAGES. 145
between wa_es ill England and wages in France. _'-' I come to ti, ls
conclusion, that, if it he true that wages are really hi_her in En_,zlaml
than in France, the only effect of that would be to h)wer the profits of
capital in Eat'land beh)w their level in France, but that will have no
effect whatever on the price of' the commodities produced ill eith_
t°'onntrv. _
'' ' _'tteu yolI Sag that wazes du not ._ffe,..t prices, what is it tha_
does affect priee._ '._;--'An increase or diminution of the quantity of
lab_)ur neces_,ary to the production of the c )mmodity."
" ' Supposing that the_'e was a free expt,rt of machinery, so that
France could _et that m._ehinerv, do you think that under'those cir-
mm_.stances we _hm:ld tel:am tt_ose advantages which we possess a t
the present moment ._'--' Yes, we should; for the export of the
machinery w_,uld nut lower our wa.a'es, or itJcreaee the wages in
France. so that we should preser_'e that advantng,, v.. the full extem
_hat we have it at this moment.'
'_ ' Will you explai:_ to the Committee why you are, of apinion that
,'he Frenet_" manufacturer would not undersell the English, seeing
that his profits are larger than the English manufaeturer_'--' Because
if he were to offer to undersell the English, he can only do it by con-
sentin_ to accept a less rate of profit on his eapltal than the other
French capitalists are making on theirs, and I cannot suppose a mah
of common sense would act upon such a principle.'
" 'Are the Committee to understand, that although a French
manufacturer pays half tile wages to hi_ men in France which our
manufacturers du in England, yet that his wages being on a par, or a
level, in general, with the other wages in France, will render his
profits on a par with them, and consequently he would not undersell
the English merchant by lowering his profits below the average rate
t)f profits in France._'--'Preeisely so. I bellows, in point of fact,
there is no such difference; but he could not undersell the English
manufacturer unless he took lower profits than all other producers in
France were maMng. I might illustrate this by what tak_.s place
every day in Jgngland, where you never find the proprietor of rich
land, in order to get rid of his produce, offering it in )[ark Lane at a
l,)wcr ra:e than that which is got by a farmer or proprictur of the
very worst land in the Kingdom.'
" ' Would it not produce a larger sate if the French manuihcturer
were to sell at a less price ?'--' Supposing that to be so, the greater
the sate the greater would be the loss of profit.' "a,
We have extracted this passage as indicating the views of the
Committee, not those of Mr. M'Oulloeh. 5Iv. 5I'Culloeh, as wilt
appear on turning to his evidence, meant by wages realt,j high al_d
¢'eal!y low, not a larger or a smaller amount, but a larger or a smaller
Report from Select Comlmtteeon Export of Toolsand Machit_'ery.Sessionor
1_25,pp. l;l, 14.
L
]46 AVERAGE RATE OF WAGES.
-_ In other words, "Might not the loss spinners might be as productive as that of
enab*c ium to bear the loss._" the Engliqh spinners. Under such cir-
_zTnl_ (tuestion appear_ to h_ve come cumstauce% if their wages could remain
from a di_'ereut interrogator. In justi,'e at one-half of E_ahsh wages, he beheved
to the ctearand intelligent evidence of_lr, that tt_. F_'ench manufacturer coutd
Bradbury. we should observe that tw _as underse]l the English manuib,cturer. Ot
far from talhag rote the common error, the accuracy of this opinion under the
that a genera ly high rate of wa_es can bL. possible, tbouah highly improbable hypo-
unfavourable to a Country. lIesetout by thesi_ in questmn, we e.ntertain no doubt,
supponug that, with the assistance of thouah, trom the tenour of the questions,
Enghsh machinery and Enghsh super- it appears not to have met with the appro-
intendents, the labour of the French batten of the Couimittee.
AVERAGE RATE OF WAGES. 147
" In short, do you know any single species of labour that stands
a master cheaper in France than in England, quality and quantity of
work being considered ?"_" I don't know any, unless it be tailors'
and shoemakers' wages ; and I am not sure about them. Clothes are
dearer in France than in England ; but shoes are cheaper, tbe dutybeing
off leather."--First Re]_ort of tl_e Factory Commission, D. i. p. 121.
Even in the same Country, and in the same employments, similar
inequalities are constantly observed. Every one is aware that much
more exertion is undergone by the labourer by task-work than by the
day-labourer ; by the independent day-labourer than by the pauper;
and even by the pauper than by the convict.
It is obvious that the rate of wages is less likely to be uniform than
the price of labour, as the amount of wages will be affected, in the
first place, by any variations in the price, and in the second place, by
any variations in the amount, of the labour exerted.
In England, the average annual wages of labour are three times
as high as they are in Ireland ; but as the labourer in Ireland is said
not to do more than one-third of what is done by the labourer in
England, the price of labour may, in both Countries, be about equal.
In England, the labourer by task-work earns much more than the
day-labourer ; but, as it is certainly as profitable to employ him, the
price of his labour cannot be higher. It may be supposed, indeed,
that the price of labour is every where, and at all times, the same ;
and, if there were no disturbing causes,--if all persons knew perfectly
well their own interest, and strictly followed it, and there were no
difficulties in moving capital and labour from place to place, and from
employment to employment,--the price of labour, at the same time,
would be every where the same. But these difficulties occasion the
price of labour to vary materially, even at the same time and place ;
and variations both in the amount of wages and in the price of labonr,
at different times and in different places, are occasioned not only by
these causes, but by others which will be considered in a subsequent
part of this Treatise.
These variations affect very differently the labourer and his em-
ployer. The employer is interested in keeping down the price of
labour ; but while that price remains the same, while at a given
expense he gets a _ven amount of work done, his situation remains
unaltered. If a farmer can get a field trenched for .El2, it is indif-
ferent to him whether he pays the whole of that sum to three capital
workmen, or to four ordinary ones. The three would receive higher
wages than the four, but, as they would do proportionably more work,
their labour would come just as cheap. If the three could be hired at
£8 108. a-piece, while the four required £3 a-piece, though the wages of
tile three would be higher, the price of the work done by them would
be lower.
It is true that the causes which raise the amount of the labourer's
]'50 A:',IOUNTOF WAGESAND PP,ICE OF LABOUI:.
waTes often raise the rate of the capitalist's profits. If, by increased
industry, one m,_n performs the work of two, beth the amoun*_ of
wages and the rate of protits will _encrally be raised. But tile rate
of profit will be raised, not by the ri,e of wages, but in consequence
of the additional supply o["labom" having diminished its price, or
having diminished the period for wb.ich it had previously been neces-
sary to advance that price, or having rendered, as in'the instances
mentioned by Edwin Rose, the labour previously employed more pro-
ductive.
Tile lahourer, on the other hand, is principally interested in the
am,rant of wages. The amount of bls wages being fixed, it is cer-
tainly his interest that the price of l;i- labour should be high, for on
that depends the degree of exertion impe_ed on him. But, if the
amount of his wages be low, he mnst be comparativel_- poor--if that
amount be high he must be comparatively rich--whatever be his
remuneration for each specific act of exertion. In the one case he
will have leisure and want: in the other toil and abundance. We are
far from thinking that tlle evils of severe and incessant labour, or the
benefits of a certain degree of leisure, ought to be ]eft out in an)"
estimate of happiness. But, as we observed in the beginning ,_" thl.
Treatise, it is not with happiness, but xGth _eatth, that we a_e con-
cerned as Political Economists; we profess to state facts ft, r the
information and inqtruction of the stndent, not to lay down rules to
guide the conduct of the legislator. In explaining tile general laws
according to which wealth is produced ahd distributed, we do not
assume that all the mean_ bv which it can be auzmented ought to be
encouraged, or even _o be permitted. We do not assume even that
wealth is a benefit. In fact, however, wealth and happiness are very
seldom opposed. _Xature, when she imposed on man the necessity of
l_bour, tempered his repugnance to it by making long-continued
i.mctivity painful, and by strongly associatin_ with exertion the idea
of its reward. The poor and half employed Irish labourer, or the
still poorer and less industrious savage, is as inferior in happiness as
he is in income to the hard-worked Engl;sh artisan. The English-
man's industry may sometimes be exeesdve ; his des!re to better his
condition may sometimes drive him on toils productive of disease ill
recompensed by the increase of his wages ; but that such is not gene-
rally the case may be proved by comparing the present duration of
life'in England with its former duration, or with its duration in other
Countries. It is generally admitted that, during the last fifty years,
marked increase has taken place in the industry of our population,
and that they are now the hardest-working labourers in the world.
But during the whole of that period the average duration of their
lives has been constantly increasing, and appears still to increase;
and, notwithstanding the apparent unheahhiness of many of thei
occupations, notwithstanding the atmosphere of smoke and steam
I'P.OXIMATECAUSE DECIDING THE RATE t)F WAGV% 15_
their estates from arable into pasture. Instead of ten families for
every two hundred acres, two might be sufficient : one to raise the
subsistence of the two, and the other to tend the cattle and sheep.
The revenue of the landlords and the farmers would be increased :
and, if they employed the whale of that increase in the purchase of
Irish labour, all parties would he benefited. But if they devoted the
greater part of it to the purchase of English manufactures, the services
of a large portion of the Irish labourers would cease to be required ;
a large portion of the land formerly employed in producing commodities
for their use would be devoted to the production of commodities for
the use of England ; and the fund for the maintenance of Irish labour
would fall, notwithstanding the increase of the revenue of the landlords
and farmers.
lb_meei_m.--Thirdly. It is incon¢istent with the prevalent opinion
that the non-rez'idence of landlords, fun(ted t_'oprictor._, mortgagees,
and other unprodtlctive consvmer_¢_ca_ be detrimental to the labourin_
inhabilants era Country which does not export raw prod_ce.
In a Country which expoTts raw produce, wages may be lowered by
such non-residence. If an Irish landlord resides on his estate, he
• requires the services of certain persons, who must also be resident
there, to minister to his daily wants. He nmst have servants, gar-
deners, and perhaps gamekeepers. If he build a house, he must
employ resident masons and carpenters ; part of his furniture he may
import, but the greater part of it must be made in his neighbourhood :
a portion of his land, or, what comes to the same thing, a portion of
his rent, must he employed in producing food, clothing, and shelter
for all these persons, and for those who produce that food, clothing,
and shelter. If he were to remove to England, all these wants would
be supplied by Englishmen. The land and capital which was formerly
employed in providing the maintenance of Irish labourers would be
employed in producing corn and cattle to be exported to England to
provide the subsistence of English labourers. The whole quantity of
commodities appropriated to the use of Irish labourers would be dimin-
ished, and that appropriated to the use of English labourers increased,
and wages would, consequently, rise in England, and fall in Ireland.
It is true that these effects would not be co-extensive with the land-
lord's income. While, in Ireland, he must have consumed many
foreign commodities, he must have purchased tea, wine, and sugar,
and other things which the climate and the manufactures of Ireland
do not afford, and he must have paid for them bv sending c-rn and
eatde to England. It is true, also, that while in 'Ireland he probably
employed a portion of his land and of his rents for other purposes,
from which the labouring population received no benefit, as a deer park,
or a pleasure garden, or in the maintenance of horses or hounds. On
his removal, that portion of his land which was a park would be
employed, t)art]y in producing exportable commodities, and partly in
] 5(; EFFECTS OF ABSENTEEIS)I.
producing subslstenee for its eulti',ators ; al_tl that portion which fed
horses fur his u,e ni[gl,t be employed ill fee(li_,g horses for exportation.
The first of tht_-se alterations would do flood ; the second could do no
harm. Nor nmst we forget that, through the cheapness of conveyance
between Ena'land and Irehmd, a portion or perhaps all, of those whom
he employe,-I in Ireland might follow him to England, and, in that ease,
wages in neither Country wouhl be affected. The fuml for the main-
tenanee of labourers in ireland, and the number of labourers to be
maintained, would both be equally diminished, and the %nd for the
maintenance of labourers in Et@and. and tile number of labourers to
be maintained, would both be equally increased.
But after making all these deductions, and they are very great, from
the supposed effect of the absenteeism of the Irish proprietors on the
labouring classes in Ireland, we cannot agree with 3Ir. )i'Culloeh that
it is immaterial. We cannot but jt_in in the general opinion that their
return, though it would not affect the prosperity of the British Empire,
considered as a whole, would be immediately benellcial to Ireland,
though perhaps too much importance is attached to it.
In Nr. M'Culloch's celebrated examination b,.f,_,'e tl_e Comm;ttee
on the state of Ireland, (4th Report, S14:, Sess. lb25,) he was asked,
" Supposing the largest export of Ireland were in live cattle, am', that
a considerable portion of reltt had been remitted in that mannel; does
not such a mode of producing the means of paying rent contnbute less
to the improvement of the poor than any extensive employment of
them in la!mu," would produce ._"--IIe replies, " Unless the means of
paying rent are changed when tile landlord goes home, his residence
can have no effect whatever."
"' Would not," he is a._ked, " the population of the country be
benefited by. the expenditure among them of a certain portion of the
rent which (if he had been absent) has (wouldhave) been remitted
(to England) !" No, he replies. " I do not see how it could be
benefited in tile least. If you have a certain value laid out ag'ainst
Irish commodities in the one case, you will have a certain value laid
out against them in the other. The cattle are either exported to
:England, or they stay at home. If they are exported, the landlord
will obtain an equivalent for them in English commodities ; if they are
not, he will obtain an equivalent for them in Irish commo&ties ; so
that in both cases the landlord lives on the cattle, or o_ the value of
the cattle : and whether he lives in Ireland or in England, there is
obviously just the very same amount of commodities for the people of
Ireland to subsist upon."
This reasoning assumes that the landlord, while resident in Ireland,
himself personally devours all the cattle produced on his estates ; for
on no other supposition can there be ttte very same amount of com-
modities for the people of Ireland to subsist upon, whether their eat_le
are retained in Ireland or exported. /
EFFECTS OF ABSENTEEISM. 157
But when a Country does not export raw produce, the consequences
of absenteeism are very different. Those who derive their incomes
fl'om such a Country cannot possibly spend them abroad until they
have previously spent them at home.
When a Leicestershire landlord is resident on his estate, he emplo_ s
a certain portion of his land, or, what is the same, of his rent, in
maintaining the persons who provide for him those commodities and
services, which must be produced on the spot where the 3' arc consumed.
If he should remove to L_,ndon, he would want the services of Lon-
doners, and the produce of ]aiJd "rodcapital which previously maintained
labourers resident in Leicester would be sent away to maintain
labourers resident in London. Tile ],Lbourers would 1,robably follow.
and wages in Leicestershire and Lot.don would t],en he unaltered ; but
until they did so, wages would rise in the one district and fall in the
other. At the same time, as the rise and fall would compensate one
another, as the fund fur tlle mainteuance of h:bour, and the number
c,f labourers to be maint_ined, wouhl each remain the same, the same
amount of wages would he distributed among the same number of
persons, though not precis_,]y ia the same proportion am before.
If he were now to remove to Paris, a new distribu:ion must take
place. As the price of raw produce is lower in France than in
England, and the difference in habits and language between the two
Countries prevents the transfer of labourers from the one to the other,
nciflmr the labourers nor the protluec of his estates could follow him.
IIe must employ French labourers, and he must convert his share of
the produce of his estate, or, what is the sauJe thing, his rent, into
some exportable form il__,rder to receive it abroad. It may be supposed
that he would receive his r, ut in mor_ev. Even if he were to do so,
the English labourers would not_be inj_red, fl_r as the'," do not eat or
drink money, provided the same amount of comm,,,!ities remained for
their use, they would be unaffected by the export of money. But it
is impossible that he could receive his rent in money unless he chose
to suffer a gratuitous loss. The rate of exchange between London
and Paris is generally rather in favour of Londo: b and scarcely ever
so deviates front par between any two Countries, as to cover the
expense of transferring the precious metals from the one to the other,
excepting between the Countries which do, and those which do not,
possess mines. The remittam.es fi'om England to France must be
sent, therefore, in the form of manufactures, either directly to France,
or to some Country with which France has commercial relations.
And how would these manufactures be obtained ._ Of course in
exchange for the landlord's rent. His share of the produce of his
estates would now go to Birmingham or Sheifield, or Manchester or
London, to maintain the labourers employed in producing manufactures,
to be sent and sold abroad for his profit. .An English absentee
employs his income precisely as if he were to remain at home and
]58 MORAL EFFECTS OF ABSENTEEISM.
Nothing can be more rash than to predict that good would be the
result of causes which are quite as capable of producing evil.
The economical effects have been still more generally misunder-
stood ; and we have often been tempted to wonder that doctrines so
clear as those which we have just been submitting to our readers
should be admi;ted with reluctance even by those who feel the proofs
to be unanswerable, and should be rejected at once by others, as
involving a paradox too monstrous to be worth examination.
5%eh of this, proi,ahly, arises from a confusion of the economical
with the moral part oe the questien. 31any writers and readers
of Political Eeon,),ny furzet that the clearest proof that absenteeism
diminisims the v_rtue or the happiness of' tim remaining members (,f a
,:ommunity is no answer to arguments which aim only at proving that
it does not diminish their wealfl_.
Another and perhal,s the chief source of error is the circumstance
:hat, when the landlord is present, the gain is concentrated, and the
loss diffused, when he is absent the gain is diffused, and the loss
concemrated. When he quits his estate, we can put our finger on
the village tradesman and labourer who lose his custom and employ-
ment. We cannot trace the increase of custom and employment
that is consequently scattered among millions of manufacturers.
When he returns, we see that the expenditure of £200_) or 2;3000 a
year in a small circle gives wealth amt spirit to its inhabitants. We
do not see. however clearly we may infer it, that so much the tess is
expended in Manchester. Birmingham, or Leeds. The inhabitants
of his village attribute their gain and their loss to its causes; and
their complaints and acknowledgments are loud in proportion to the
degree in which they feel their interests to be affected. No single
manufacturer is conscious that the average annual export of more
than forty n.illions sterling has been increased or diminished to the
amount of £2000 or £3000. And even if aware of that increase or
diminution, he would not attribute it to the residence in Yorkshire or
Paris of a given indMdual, of whose existence he probably is not
aware. When to obvious and palpable effects nothing is to be
opposed but inferences deduced by a long, though perfectly demon-
strative, reasoning process, no one can doubt which will prevail, both
with the uneducated, and the educated, vulgar.
Many persons, also, are perplexed by the consideration, that all the
commodities which are exported as remittances of the absentee's
income are exports for which no return is obtained ; that they are as
much lost to this Country as if they were a tribute paid to a foreign
State, or even as if they were thrown periodically into the sea. This
is unquestionably true; but it must be recollected, that whatever is
unproduetively consumed is, by the very terms of the proposition,
destreyed, without producing any return. The only difference
between the two cases is, that the resident landlord performs that
EFFECTS OF ABSENTEEISM. 161
men besides the seven that work it. At the end of the year the
capitalist's situation would be unaltered: he would have wages for
thirteen men, the produce of the labour of his other ten men during
the year ; and his machine, also the produce of the labour of ten men
during the year, and therefore of equal value. And his situation
would continue unaltered. Every year his machine would produce
wages for thirteen men, of whom seven must be employed in repair-
ing and working it, and six might, as before, be employed for the
benefit of the capitalist. But we have seen that, during the year in
which the machins was constructed, only ten men were employed in
producing wages instead of twenty, and, consequently, that wages
were produced for only thirteen men instead of for twenty-six. At
the end of that year, therefore, the fund for the maintenance of
labour was diminished, and wages must, consequently, have fallen.
It is of great importance to recollect, that the only reason for this
fall was the diminution of the annual production. The twenty men
produced wage_ for twenty-six men, the machine produces wages for
only thirteen. The vulgar error on this subject supposes the evil to
arise, not from its true cause, the expense of constructing the machine,
but from the productive powers of that machine. So far is this front
being true, that those productive powers are the specific benefit which
is to be set against the evil of its expensiveness. If, instead of wages
for thirteen men, the machine could produce wages for thirty, its use,
as soon as it came into operation, would have increased instead of
diminishing the fund for the maintenance of labour. The same effect
would have been produced, if the machine could have been obtained
without expense ; or if the capitalist, instead of building it out of his
capital, had built it out of his profits ; if, instead of withdrawing ten
men for a year from the production of wages, he had employed in its
construction, during two years, five of the men whom he is supposed
to have employed in producing commodities for his own use. In either
case, the additional produce obtained from the machine would have
been an additional fund for the maintenance of labour; and wages
must, according to our elementary proposition, have risen.
We have thought it necessary to state this possible evil as a part
of the theory of machinery, but we are far from attaching any practi-
cal importance to it. We do not believe that there exists upon record
a single instance in which the whole annual produce has been dimin-
ished by the use of inanimate machinery. Partly in consequence of
the expense of constructing the greater part of machinery being
defrayed out of profits or rent, and partly in consequence of the great
proportion which the productive powers of machinery bear to the
expense of its construction, its use is uniformly accompanied by an
enormous increase of production. The annual consumption of cotton
wool in this Country, before the introduction of the spinning-jenny,
did not exceed twelve hundred thousand pounds; it now amounts to
164 WAGES.
pounds of yarn in the same time that he now tal_es to turn off six
hundred and forty eight. He was paid at the rate of 4s. ld. per
pound in 1829, he is now paid at the rate of 2s. 5d. But three
hundred and twelve pounds at 4s. ld. amount to one thousand two
hundred and seventy-four shillings, and six hundred and forty-eight
pounds at 2s. 5d. to one thousand five hundred and sixty-six shillings.
He receives, therefore, two hundred and ninety-two shillings more
than he did in ]829 for equal times of work. It is perfectly true
that he does ' more work for less wages than in 1S29 ;' but this is
nothing to the purpose, when the proposition to be proved is, that
'wages are lower than formerly? I mean to say, that a spinner
earns a shilling, or a pound, or a hundred pounds, in less time at
present than he would have consumed in earning a shilling, or a
pound, or a hundred pounds, ten years ago, and with the same or less
labour; that this enhancement of his earnings has been owing to
improvements in machinery ; that the progress of improvements will
progressively advance his earnings still higher, and at the same time
enable a greater number of individuals to profit by the enhanced
rate than actually profits by the actual rate ; (provided that nothing
occurs to prevent the cotton business from developing itself for the
next thirty years as it has done for the last ;) and that any i_,._prove-
ment in the machinery in any one of the numerous depart.merits of
cotton-working will operate to enhance the rate of wages in all other
br._uches, as well as in that department in whictl it takes place, by
increasing the actual previous demand for labour in those other
branches. I assert that every improvement of cotton machinery, in
any department of cotton-working, has hitherto had the effect of
enabling 'an operative' (speaking in general of every one, in every
department whatever) to earn a greater net amount of money, in any
given time, than he would have done if the improvements had never
taken place.
" The misconceptions as to the real effect of machinery on the
wages of labour which the operatives entertain are the causes of turn-
outs and strikes; they produce rankling discontent towards their
masters, and I regret that I have not had the opportunity of giving
them a fuller exposure.
" I certainly consider it of great consequence that the operatives
themselves should be satisfied that improvements in machinery tend
to raise the amount of money that they gain individually and generally,
for the same number of hours' work. Those who dispute the fact
must, I think, admit that I have established it in the cases which I
have selected, as far as spinners are concerned ; and as they must
likewise admit that the improvement specified creates a fresh and
additional demand for young hands, they must also admit that the
wages of young hands are augmented in consequence. They must
e(lual__lyadmit, that as the price of the article will be lowered in the
168 WAGES.
were altered, that portion of the fund for the maintenance of labour,
which consists of corn and sugar, would ibe increased. And the
general rate of wages, as estimated in two of the most important
articles of food, would be raised.
Sixthly. The views which we have been endeavouring to explain
arc inconsistent with the common opinion, that t]w unproductive con,.
sumptio_ of landlords and capitalists is beneficial to the labouring
classes, because it furnishes them v_h employment. " Tillage," says
Paley, (and this is another form of the same fallacy,) " is preferable
to pasturage, not only because the provision which it yields goes
much further in the sustentation of life, but because it affords employ-
merit to a more numerous peasantry." The production of more sub-
sistence is certainly an advantage, but what is the advantage of its
requiring more labour ? If this be an advantage, the fertility of land
is an evil. If the thing required be employment, we should abandon
ploughs and even spades. To scratch up a rood with the fingers
would give more employment than to dig an acre. Those who main-
tain that unproductive consumption does good by affording employ-
ment, must forget that it is not employment, but food, clothing,
shelter, and fuel, in short, the materials of subsistence and comfort,
that the labouring classes require. The word "employment" is
merely a concise form of designating toil, trouble, exposure, and
fatigue. It is indeed sometimes elliptically used as implying the
subsistence which is purchased by enduring it. A poor man com-
plains that he wants wovtz. He might work to his heart's content,
and with no man's leave, if he chose to carry stones from the bottom
to the top of a hill. But what he wants is work as a means of
obtaining payment. He would be happy to get the payment without
the work. Toil, exposure, and fatigue, per se, are evils, and the less
of them that is required for obtaining a given amount of subsistence
and comfort, or, in other words, the greater the facility of obtaining
that given amount, the better, ccelerzsparibus, will be the condition
of the labouring classes; indeed, of all classes in the community.
What occasions the prosperity of a colony ? Not the dearness of
subsistence, but its cheapness; not the diflleulty of obtaining food,
clothing, shelter, and fuel, hut the facility. _ow how can unproduc-
tive consumption increase this facility ? How can the fund from which
all are to be maintained be augmented by the destruction of a portion
of it ? If the higher orders were to return to the customs of a
century ago, and cover their coats with gold lace, they might enjoy
their own finery; but how would that benefit their inferiors ? The
theory which we are considering replies that they would be benefited
by being employed in making the lace. It is true that a coat, instead
of costing £5, would cost £55. But what becomes now of the extra
_50 ? for it cannot be said that, because it is not spent on a laced
coat, it does not exist. If a landlord with £10,000 a-year spends it
170 WAGES.
On what, then, does the extent of that fund depend ? In the first
place, on the productiveness of labour in the direct or indirect produc-
tion of the commodities used by the labourer ; and, in the second place,
on the number of persons directly or indirectly employed in the pro-
duction of things for the use of labourers, compared with the whole
number of labouring families. If we wished to ascertain the compar-
ative wages of the labouring population ia two parishes, containing
each, we will say, twenty-four labouring families, these are the only
two points to which we need direct our inquiries. If we found that
in the one parish eighteen families, and in the other only twelve, were
employed in producing commodities for the whole twenty-four, we
should infer that, supposing the labour of each to be equally productive,
wages must be higher by one-fourth in the first than in the second.
:But if we found that in the second parish labour was more producti_o
by one-half than in the first, we should infer an equality of wages in
ti_e two.
Asia want the moral and intellectual qualities by which the raw
materials of wealth are to be worked up. :Even the Icelanders seem
to be richer than the Guachos. But, although local advantages are
far from being the most efficient causes of the productiveness of labour,
their influence must not be disregarded. They have enabled the
colonies of highly civilized nations to advance to opulence with a
rapidity of which we have no other example.
Thirdly. The productiveness of labour partly depends on the degree
in which ,it is assisted by abstinence, or, to use a more familiar expres-
sion, by the use of cap#al.
We have already explained the advantages afforded by capital, and
traced them to the use of implements and the division of labour, and
need only remind our readers that, of all means by which labour can
be rendered productive, the use of capital is far the most efficient.
Without tools, and without the division of employments, man would
be an animal less capable of obtaining enjoyment, or even subsistence,
than the brutes of the field.
.Fourthly. The last of the causes which influence the productiveness
of labour is the existence o_ the absence of government interfereT_ce.
The essential business of government is to afford defence; to
protect the community against foreign and domestic violence and
fraud. Unfortunately, however, governments have generally supposed
it to be their duty, not merely to give security but wealth ; not merely
to enable their subjects to produce and enjoy in safety, but to teach
them what to produce and ]ww to enjoy ; to give them instruction how
to manage their own concerns, and to force them to obey that instruc-
tion.
Unfortunately, too, the ignorance and folly w_th which they have
attempted to execute this office have been equal to the ignorance and
folly which led them to undertake it. Partly under the influence of
what has been called the Mercantile Theory, the theory which teaches
that wealth consists of ,told and silver, and may be indefinitely increased
by exporting commodities, and receiving only money in return ; and
partly misled by the circumstance, that when an individual, or a class,
,,htains a monopoly against the public, the loss, however great, becomes
imperceptible from its diffusion, and the gain, however trifling, is
obvious, because it is concentrated, it has long been the ruling principle
of commercial statesmen to favour direct at the expense of indirect
production ; to refuse participation in the benefits bestowed by nature
on foreign Countries, though at the expense of surrendering a portion
of what she has conferred on their own ; and to force the industry of
their subjects from those channels in which they have peculiar advan-
tages, into those for which their climate, their habits, and their soil
are inappropriate.
It is under the influence of these causes that the civilized world has
lately exhibited the strange spectacle of general peace accompanied by
ANTI-COMMERCIALSYSTEM. 177
the American War,) the usual price of common labour there was 8d.
a-day, or 4s. a-week. It is now more than 8s. a-week ; a sum capable
of purchasing one-third more of raw produce, and three or four times
as much of manufactured produce, as the former wages. Though the
rental of the Lowlands has more than tripled, though a much larger
portion of what the labourer produces is produced for the benefit of
the landlord, yet the positive increase of the whole produce more than
compensates this apparent inconvenience. Instead of producing, we will
say, twenty bushels, of which the landlord received ten, the capitalist
two, and the labourer eight, he produces perhaps thirty-five, of which the
landlord receives twenty, the capitalist three, and the labourer twelve.
It appears, therefore, that the whole fund for the maintenance
of labour is not necessarily diminished in consequence of a consider-
able portion of the labourers in a Country being employed in pr_.ducing
commodities for the use of the proprietors of the natural agents in that
Country. Such labourers may, in fact, be considered as existing
only in consequence of the existence of natural agents of extraordinary
productiveness. They draw their subsistence not from the common
fund, such as it otherwise would be, but from the addition made to
that fund by that extraordinary productiveness.
Of course, wheu we speak of the amount of rent as unimportant to
the labourer, we must be understood to mean only that rent which
arises from the peculiar or increased productiveness of the natural
agent in question, not of that which arises merely from an increase
of population. We have already stated that, in the absence of
disturbing causes, subsistence may be expected to increase in a
greater ratio than population. But, as we then remarked, it certainly
is possible, and perhaps, under the influence of superstition and
misgovernment, it is probable, that the number of inhabitants in
a Country might increase without a commensurate increase of the
means, direc_ or indirect, of obtaining raw produce. Under such
circumstances, rents would rise, and labour, which, if the population
had remained stationary, would have been employed in the productiou
of commodities for the use of labourers, would now be employed in
producing commodities for the use of landlords. A rise of rent so
occasioned would of course be detrimental to the mass of the conmmnity.
It must be recollected, also, that the government of every Country has
in some measure the power of deciding in what proportions the different
classes of its subjects shall contribute to the public burdens. Some
governments have attempted to exempt, as far as they could, the
labourers from these burdens, and to throw them as far as they could
upon the landlords. Others again have charged, or have allowed
individuals to charge, the revenue arising from land with an expenditure
for purposes in which the landlords were not solely or principally
interested ; such as the establishment and maintenance of roads and
bridges, the supply of religious, moral, and intellectual instruction, the
] 82 TAXATION.
affording gratuitous medical relief to the sick, and even support to the
able-bodied poor or their families. Others, on the other hand, have
endeavoured to favour the landlords by imposing public expenditure
on the more defenceless portion of the community, the labourers ; and
many have adopted each of these different lines of conduct on different
occasions, or with respect to different portions of their expenditure.
The tendency of every such institution must be to augment or diminish
the proportion of the labourers employed for the benefit of landlords,
compared with that of those who are employed for the benefit of
labourers.
Another cause disturbing these proportions is the attempt by a
government to create rent, if it can be called rent, by forcibly limiting
the bounty of nature. It is possible that, if we had continued to
prohibit the corn of Ireland, the incomes of English landlords might
have been increased. So, if no coal were allowed to be burned except
the produce of a single colliery, the possessor of that colliery would
enjoy a princely revenue. But the gain from such a monopoly is not
strictly rent ; it is oppression and robbery.
security, and security is of all blessings the most important, and the
one least capable of being obtained by uncombined exertions. Those
writers who have maintained that whatever is raised by taxation is
deducted from the revenue of the Country, seem to have been led to
this conclusion, by observing that the object of government is to
occasion not positive but negative effects, not to produce good, but
to prevent evil. And they have thought it right to deduct what is so
spent from the net revenue of the people. But it must be recollected
that the mere prevention of evil is one of the principal objects even of
individual expenditure. We do not build houses because it is pleasant
to breathe the confined atmosphere of a room, but because roofs and
walls are the only means by which the inclemency of the seasons can
be avoided. We do not buy drugs for our pleasure, but to avert or
remove disease. Yet no one ever thought what he spends on medicines
and on house rent a deduction from his income. When the members
of a Friendly Society raise among themselves a fund for their relief in
sickness, they do not consider their contributions a deduction from •
their wages, but a mode of expenditure. And it may be asked, in
what respect does each man's contribution towards the means by
which the community is to be protected against internal and external
violence and fraud differ from his contribution to a Friendly Society,
excepting that those evils are more severe and more constantly
imminent than sickness, and less capable of being warded off by
individual efforts ? It is true that, if the protection could be less
expensively obtained, the fund for the maintenance of labour would be
increased. But this is merely an exemplification of what we have
already stated, that the extent of the fund for the maintenance of
labour depends mainly on the productiveness of labour. If fewer
fleets, and armies, and magistrates, could preserve the peace, that is,
if labour were more productive in affording security, the labouring
classes would, ca_eris paribus, be better off, just as they would be
better off if fewer husbandmen or artisans could produce, directly or
indirectly, the same quantity of corn; that is, if labour were more
productive in supplying food.
But admitting all this to be true, it is also true, as we have already
remarked, that the labourer is interested not only in the amount and
application of the public revenue, and in the degree in which its pay-
merit affects the productiveness of labour, but also in the manner in
which the burthen of supplying it is distributed. If the duty on wine
were abolished, and an equal revenue raised by substituting an addi-
tional duty on coarse tobacco, the labourers, who are the only consumers
of coarse tobacco, would purchase, with the same proportion of their
wages, less tobacco than before, and the landlords and capitalists, who
are the only consumers of wine, would purchase, with the same pro-
portions of their rent and profits, more wine. The productiveness of
our labour and the export of our manufactures would be undiminished;
184 TAXATION.
even the nature of our exports need not be altered ; the only change
would be in the returns. More wine and less tobacco would be
imported. More labourers, therefore, than before, would be employed
in obtaining wine for landlords and capitalists, and fewer in obtaining
tobacco for labourers.
Nor must it be forgotten that a part of the taxes received by the
government of one Country is often paid by the inhabitants of another.
We now purchase annually in China about thirty millions of pounds of
tea, at about Is. a pound. 0n the tea so purchased we impose in
different ways taxes to the amount of about two hundred per cent.
Were we to repeal that taxation, and the price in China were to remain
unaltered, our consumption would probably quadruple; but it is
highly improbable that we could purchase one hundred and twenty
millions of pounds of tea at ls. a pound. The price in China might
possibly double; it probably would rise one-half. That rise would
have a tendency to raise the rent of land and the wages of labour in
the tea-growing districts of China. It must be admitted, therefore,
that they are both kept down by the existence of the tax; and that
a portion of our duty on tea is, in fact_ paid by the inhabitants of the
tea-growing districts of China. The same reasoning proves that a
part of the English duty on claret is pa;d by France, and that a part
of the duties imposed by foreign nations on some of the commodities
which we export, is paid by England. As a portion of the taxes raised
by every State is, in fact, paid by the inhabitants of those Countries
with which it has commercial relations, and as war and misgovernment
are the great causes of taxation, an additional proof is afforded of the
degree in which each Country is interested in the freedom and trau-
quillity of its neighbours.
We have lastly to consider the influence of profits on wages ; or, in
other words, the extent to which wages may be affected by the
employment of labour to produce, instead of wages, things for the use
of capitalists. In civilized and well-governed communities, this is the
principal purpose to which labour, that otherwise might be employed
for the benefit of the labourers, is diverted. The labourers who are
employed for the benefit of the owners of natural agents may, as we
have seen, be in general considered as a separate class, not withdrawn
from the general body, but added to it by the existence of those
natural agents. Those who are necessarily employed in effecting the
legitimate purposes of government are, in fact, employed for the
benefit of the labouring population, and the taxation which supplies
their maintenance is not necessarily a deduction from wages, but a
mode of expenditure. That few governments have confined themselves
to their legitimate office, or employed in effeeting that ofi%e only the
necessary amount of labour, is a melancholy truth ; and it is true that
the fund for the maintenance of labour may be, and in most Countries
has been, and is, more diminished in its amount, and more retarded
INFLUENCE OF PROFIT ON WAGES. 185
' The facts which decide in what proportions the capitalist and
labourer share the common fund appear to be two: first, t/_e general
irate of profit in the Country on t]_e advance of cap_tal Jbr a give_
i pcriod ; and, secondly, the period which in each particular case _as
elapsed between the advance of the capital and the receipt or"the profit.
mcnts, (including, under the last term, not merely the ordinary tools
of manual labour, but machinery, ships, and even roads, wharfs, and
canals,) and partly labour. The materials and implements are supplied
by the capitalist directly, the labour is supplied by him indirectly, by
advancing the wages of the labourers. The labourers, aided by their
implements, convert the materials into a new and vendible commodity,
which is termed the re2urn of the capitalist. And the capitalist's profit
depends on the difference between the value of the advance and the value
of the return. In producing the return, the wages and materials are
necessarily consumed; they are parted with by the capitalist, and
therefore termed circulating capital. The implements are not neces-
sarily consumed; so far as they are unconsumed they remain the
property of the capitalist, and are therefore termed fixed capital.
The value of that portion of them which remains unconsumed must be
added to that of the other returns before the profit can be estimated.
The capital of a builder is almost entirely circulating. It consists
principally of the bricks, lime, timber, stone, and slate which are the
materials with which the house is to be constructed, and of the money
necessary to pay the wages of the workmen. His fixed capital
(exclusively of his konwledge) consists merely of scaffolding and
ladders. All these he advances, and the result, after a certain interval,
is a house, together with the forrher ladders and scaffolding somewhat
the worse for wear. The cotton-spinner's advances consist of raw
cotton and wages, which are his circulating capital, and buildings and
machinery, which are his fixed capital. His returns are a certain
quantity of manufactured cotton, and the old buildings and machinery.
So, a ship-owner's advances consist of his ship, which is his fixed
capital, and of its stores, and the wages of his sailors, which are his
circulating capital; his returns are his freight, or, in other words, the
hire which he receives for the use of his ship, the ship itself, such as
it may be, after the voyage, and the stores, if any of them remain
stated, of the difference between the value of the advances and the
unconsumed.
value of the returns.
The profit in every case consists, as we have already
How Profit is to be E*timated.--BUt in what is this value to be
estimated? Of course in something as unsusceptible as possible of
variations in its general value. If the value of the advances and
returns of the capitalist were estimated in corn or in hops, an abun-
dant season might so reduce the value of either as to make him
appear a gainer when in fact a loser. His returns might be worth
twenty per cent. more of corn or hops than his advances, and yet be
inferior in general value. The commodity least susceptible of variation
in its general value, during short periods, is money; and partly from
this circumstance, and partly from its general use as a measure of
value, it is the medium in which calculations of profit are usually
expressed. :But, if considerable periods are to be taken, even money
GENERAL
RATEOF PROFIT. 187
labour of twenty families during the previous year ; (being the stock
reserved for his own consumption.)
Under such circumstances, if each capitalist should employ his
capital in setting one hundred families to work to reproduce wages,
and twenty more to reproduce commodities for his own use, and the
labouring population should neither increase nor diminish, the rate of
profit would remain stationary at twenty per cent. per annum. The
advances every year would be one thousand quarters of corn, being
wages produced by the labour of one hundred families, and command-
ing the labour of one hundred and twenty ; the returns would be a
stock of wages commanding the labour of one hundred and twenty
families during the next year, which would be, in fact, a reproduction
of the previous capital of one thousand quarters, and also a stock of
commodities for the capitalist's own use, produced by one-sixth of the
labour employed in reproducing the capital, and therefore one-sixth of
the value of the capital. The value of the returns on an advance of
capital for a year would exceed the value of the advances by one-sixth.
The rate of profit therefore would, as we said before, remain stationary
at twenty per cent. per annum. And five-sixths of the labourers
would be employed in producing commodities for their own use, and
one-sixth in producing commodities for the use of the capitalists.
We will now consider the effects of any alteration in the proportion
of capital to labour. Suppose that emigration or an unhealthy season
should diminish by fifty the number of labouring families: each
capitalist would have the same capital ; consisting of wages produced
by the labour of one hundred families during the year, and which we
have called one thousand quarters of corn : but the number of labourers
being diminished by one-twenty-fourth, instead of commanding the
labour of one hundred and twenty families, they would command the
labour of only one hundred and fifteen. The one thousand quarters of
corn would be divided among one hundred and fifteen families instead
of among one hundred and twenty, and the capitalist would get only
fifteen casks of wine during the subsequent year instead of tweniy.
To take the converse: if immigration or an increase of popula-
tion should have increased the number of labourers by fifty, each
capitalist, instead of one hundred and twenty families, would be able
to command the labour of one hundred and twenty-five. The one
thousand quarters would be divided among one hundred and twenty-
five families, instead of among one hundred and twenty, and the
capitalist might employ twenty-five families to produce wine ibr him-
self instead of twenty. In the one case, profits rise from twenty to
about twenty-five per cent.; in the other, they fall to about fifteen.
On the other hand, if we suppose the labouring population to remain
stationary at one thousand two hundred families, but the capitalists,
instead of employing each one hundred families in the production of
wages, and twenty in the production of profits, to employ each one
190 CAUSES REGULATINGTHE RATE OF PROFIT.
labour of a small fraction less than one hundred and nineteen families.
The first, or acemnulating capitalist, would find the value of his
capital and the amount of his profits increased, though the rate of
profits had fallen one per cent. But all the other capitalists would
find both the value of their capital and the amount of their profits
.. diminished.
Now there is nothing to which a capitalist submits so reluctantly
as the diminution of the value of his capital. He is dissatisfied if it
even remain stationary. Capitals are generally formed from small
beginnings by acts of accumulation, which become in time habitual.
The capitalist soon regards the increase of his capital as the great
business of his life ; and considers the greater part of his profit more as
a means to that end than as a subject of enjoyment. It is probable,
therefore, that the other capitalists in the Country would endeavour
to keep the value of their capitals unimpaired, though at the expense
of a diminution of the general rate of profit. One after another would
follow the example of the first-mentioned capitalist, and devote to the
increase of their respective capitals a portion of the labour previously
employed in furnishing commodities for their own use. In time each
capitalist, instead of employing one hundred families in the reproduc-
tion of capital, and twenty in supplying his own enjoyments, would
employ one hundred and ten in the reproduction of capital, and only
ten for his own purposes. The rate of profit would fall from twenty
to ten per cent., and, of the one thousand two hundred labouring
families, one thousand one hundred would be employed in producing
wages, and only one hundred in producing profits. The annual pro-
duce of the Country, instead of ten thousand quarters of corn and two
hundred casks of wine, would consist of ten thousand one hundred
quarters of corn and one hundred casks of wine. Instead of five-
sixths of the labourers in the Country being employed in producing
commodities for the use of the labourers and one-sixth for the use of
capitalists, eleven-twelfths would be employed for the benefit of the
labourers, and only one-twelfth for the benefit of the capitalists.
This fall of profit, however, could take place only on the supposition
of the number of labouring families remaining unaltered. But it is
highly improbable that it could remain unincreased. The increase of
wages would enable the labourers to marry earlier, or to raise more
numerous families. If labour should remain equally productive, their
numbers might increase until the former proportion of labourers to
capital had been restored. All the results would be beneficial. The
labourers would not be worse off than before the additional accumula-
tion took place, and the capitalists would be better off. The value of
their capitals and the amount of their profits would be increased, and
the rate of profit would be again twenty per cent. per annum.
We set out ,vith supposing a Country possessing an abundance of
fertile land. Under such circumstances the productiveness of labour
CAUSES REGULATING THE RATL OF PROFIT. 193
might for a long period continue, or even increase, with every addition
to the number of its inhabitants. But in a densely-peopled Country
the powers of labour seldom remain the same during an increase of
population. In manufactures labour becomes proportionably more
productive. In agriculture, unless aided by increased industry or
skill, or by permanent improvements of the soil, it becomes propor-
tionably less so. And, as the labourer consumes chiefly raw or
slightly-manufactured produce, tile increased facility of obtaining
manufactures may not make up for an increased difficulty in obtaining
raw produce. In an old country, therefore, when the rate of profit
has been reduced by an increase of capital, it seldom can be fully
restored by a proportionate increase of population, unless either the
labourer receives a smaller quantity of raw produce than before, or
the necessity of cultivating lands of inferior productiveness is obviated
either by permanent improvements, such as draining marshes, or
fertilizing bogs, or by additional industry or skill, or by the import_-
tion of raw produce. In such Countries the natural progress seems
to be an increase of capital, occasioning a fall of the rate of profit; a
check to that fall, occasioned by an increase of the labouring popula-
tion; a check to that increase, occasioned by an increased difficulty
in obtaining raw produce; and a diminution, rarely amounting to a
removal, of that difficulty, occasioned by permanent agricultural
improvements, increased industry or skill, or foreign importation:
leaving, as the general result, a constant tendency towards an increase
of capital and population, and towards a fall in the rate of profits.
producing commodities for himself. Both the rate and the amount o.z
profit would be increased without any diminution of wages. Such a
machine is a new labourer added to the existing number of labourers,
but a new labourer whom it costs nothing to maintain. It adds to
the amount of the profit of the capitalist who has constructed it,
without either taking from the profits of other capitalists, as must be
the case when additional capital is created, which must be kept up
and worked by additional labour; or taking from the wages of the
other labourers, as must be the case when an additional labourer is
added, whose subsistence must be taken from the common fund. A
machine or implement is, in fact, merely a means by which the pro_
ductivcness of labour is increased. The millions which have been
expended in this Country in making roads, bridges, and ports, have
had no tendency to reduce either the rate of profit or the amount of
wages. They have, in fact, had a tendency to keep up both, by
enabling labour to be more productive, and consequently enabling the
circulating capital and the population of the Country to increase in
corresponding ratios.
It appears, therefore, that in one of the main employments o!
capital, namely, the employment of labourers to produce commodities
for the use of labourers, or, in other words, to produce wages, the
difference between the value of the returns and the value of the
advances depends on the amount of labour which at a previous period
was devoted to the production of wages, compared with the amount of
labour which those wages when produced can command. And as
the rate of profits in every different employment of capital has a ten-
dency to equality, we may infer that all capitals, however employed.
yield about the same rate of profit as those which are employed in the
production of wages.
AVERAGP.PERIOD OF ADVANCEOF CAVI_AL.--Thc first of the tw,
principles which regulate the division of the produce between the
capitalist and the labourer, namely, the tale of profit in the advance
of capitalofor a given time, having been, in some measure, ascertained.
we proceed to inquire into the causes which regulate tile second prin-
ciple, namely, the average time for which _he capital must be advanced.
It must be recollected, however, that the expression "the capi-
talist's share," though familiarly used by Economists, is not strictly
correct. When the product is completed, it is the sole property of
toe capitalist, who has purchased it by paying in advance the labour-
er's wages. What is meant, therefore, by "the capitalist's share."
is that portion of the product, or of the price for which it sells, which
the capitalist can retain and apply for his own purposes, keeping the
value of his capital unimpaired. What is meant by " the labourer's
share," is that portion of the produce, or of the price for which it
sells, which the capitalist, if he keep his capital unimpaired, cannot
employ for his awn purposes, but must employ in advancing tha price
TL_,IE
OF ADV._NCE OF CAPITAL. 105
The inquiry into the causes which regulate wages has, in a great
measure, ascertained those which affect profits. _,Vehave to add only
that profits may be considered in three points of view: first, as to
their rate; secondly, as to their amount; and, thirdly, as to the
amount of desirable objects which a given amount of profit will com-
mand. The causes which decide the rate of profit have been already
considered. It has been shown that they depend en the proportion
which the supply of capital employed in providing wages bears to the
supply of labour. The rate being given, the amount of the profit
received by any given capitalist must depend, of course, on the amount
of his capital. It follows that, when the rate of profit falls in con-
sequence of an increase of capital without a proportionate increase of
labourers, the situation of the existing capitalists, as a body, cannot
be deteriorated, unless the fall in the rate has been so great as to
overbalance the increase of the amount. Two millions, at five per
cent., would give as large an amount of profit as one million at ten.
At seven and a-half per cent. they would give a much larger. And
such is the tendency of an increase of capital to produce, not indeed
a corresponding, but still a positive increase of population, that we
believe there is no instance on record of the whole amount of profits
. having diminished with an increase of the whole amount of capital.
Totally distinct from the amount of profit is the amount of desir-
able objects which a given amount of profit will purchase. A Chinese
and an :English capitalist, each of whose annual profit will command
the labour of ten families for a year, will enjoy in different degrees
the comfort and conveniences of life. The Englishman will have more
woollen goods and hardware, the Chinese more tea and silk. The
difference depends on the different productiveness of labour in China
and in England in the production of those commodities which are
used by the capitalists in each Country. ]n the command of labour,
and, in the rank in society which that command gives, they are on a
par. We have seen that, as population advances, labour has a ten-
dency to become less efficient in the production of raw produce, and
more productive in manufactures. The same amount of profit there-
fore, will enable the capitalist in a thinly-peopled Country to enjoy
coarse profusion, or among a dense population moderate refinement.
A South American, with an annual income commanding the labour
of one hundred families, would live in a log-house on the skirts of a
forest, and keep, perhaps, one hundred horses. An Englishman with
the same command of labour would live in a well-furnished villa and
keep a chariot and pair. Each would possess sources of enjoyment
totally beyond the reach of the other.
200 WAGES IN DIFFEI_ENT EMPLOYMElqTS.
Book I. Ch. X.
WAGES IN DIFFERENT EMPLOYMENTS. 90I
tinned heat or cold, or to sudden transitions from the one to the other,
which are the principal causes of unhealthiness in any business, are
also the principal causes of its being generally disagreeable. Whoa
toil, disease, and discomfort, are all to be encountered, the temptation
must indeed be high. But this union is not universal. The trade of
a house-painter is one of the most agreeable, and one of the most
unwholesome, among ordinary occupations. On the other hand, that
of a butcher, though brutal and disgusting, is eminently healthy.
The wages of each are, we believe, about equal, and considerably
exceed the remuneration for the mere labour undergone, which, in
fact, is in both cases very trifling. But the fear of popular odium,
and, what is always strongest amongst the least educated, the fear of
popular ridicule, as they are amongst the most powerful feelings of
our nature, are the most effectual means by which the wages of an
employment can be increased. To Adam Smith's instance of a public
executioner may be added that of a common informer ; both of whom
are remunerated at a rate quite disproportioned to the quantity of work
which they do. They are paid not so much for encoantering toil as
for being pelted and hissed. The most degrading of all common trades,
perhaps, is that of a beggar; but when pursued as a trade, it is
believed to be a very gainful one.
Such appears to be the influence upon wages of danger, discomfort,
and disgrace. And it may be supposed that any peculiarly agreeable
employment is generally as comparatively _mderpaid as peculiarly
disagreeable ones are overpaid. Adam Smith has accordingly remarked
that in a civilized society hunters and fishers, who follow as a trade
what other people pursue as a pastime, are generally very poor people.
"Fishermen " he observes, " have been poor from the times of
Theoeritus. The natural taste for these employments makes more
people follow them than can live comfortably by them ; and the produce
of their labour, in proportion to its quantity, comes always too cheap
to market to afford any thing but the most scanty subsistence to the
labourers." Hunting, however, can scarcly be said to exist as a
trade in any well-civilized Country. And we doubt the accuracy of
Adam Smith's statement as to fishermen; unless, as perhaps was the
case, he intended to confine them to the small number of anglers and
poachers on rivers, who do, in fact, follow as a trade what other
men enjoy as a pastime. _,Iarino fishery is a business of too much
toil and hardship to be very attractive ; and if any proof, besides the
we]l-fed persons and ample clothing of the men and their families were
required, of its being well paid, it would be found in the fact that the
capital employed in it, which is far from inconsiderable, generally
belongs to the fishermen themselves.
As a general rule, we fear it must be admitted that the occupations
open to those who are not possessed of capital differ only in the degree
in which they are disagreeable. The least disagreeable are man's
002 WAGES IN DIFFERENT EMPLOYMENTS.
per cent. per annum. This seems, however, almost too low. The
capital employed at any one time seldom exceeds in value 5s., twenty
per cent. on which would only be ls. a-day ; a sum which would
scarcely pay the wages of the mere labour employed. It is, however,
possible that the capital may sometimes be turned more than once in
a day ; and the capitalists in question, if they can be called so, are
generally the old and infirm, whose labour is of little value. The
calculation, therefore, may probably be correct, and we have mentioned
it as the highest apparent rate of profit that we know.
annual wages equal, his hourly wages must of course be three times
as high. Adam Smith, indeed, thinks that his annual wages ought
to be higher than the average, to make him some compensation for
those anxious and desponding moments which the thought of so
precarious a situation must sometimes occasion. But this evil is
compensated, and, in most dispositions, more than compensated, by
the diminution of his toil. We believe, after all, that nothing is so
much disliked as steady, regular labour ; and that the opportunities
of idleness afforded by an occupation of irregular employment are so
much more than an equivalent for its anxiety as to reduce the annual
wages of such occupations to below the common average.
In the employment of capital, however, this compensation does not
often exist. The occasional unproductiveness of his capital, generally
speaking, afi%rds no relief to the capitalist. It must, therefore, be
compensated by a surplus profit, when productive, at least enough
to balance its periods of unproductiveness. A house-builder's capital
often lies unproductive ; there are some places in which the majority
of the houses are unoccupied for nine months in the year. Tile
builder's profit during their occupation must be at least four times as
great as if they were regularly inhabited. One of the consequences
of tlm effect el_ irregularity of employment on wages and profits is t.o
_)ccasion many services and commodities to cheapen as the demand for
them increases. A man who can count on employment for four hours
a-day would be forced by competition to sell his services for nearly
half of what he might have asked if he could have reckoned on only
two hours. Prices in a watering-place always fall as the season
becomes longer.
to have a better chance for some of the great prizes, some people
purchase several tickets, and others small shares in a still greater
number. There is not, however, a more certain proposition in Mathe-
matics, than that the more tickets you adventure upon, the more
likely you are to be a loser. Adventure upon all the tickets in the
lottery, and you lose for certain; and the greater the number of your
tickets, the nearer you approach to this certainty.
" That the chance of loss is frequently undervalued, and scarce
ever valued more than it is worth, we may learn from the very
moderate profit of insurers. In order to make insurance either from
fire or sea risk a trade at all, the common premium must be sufficient
to compensate the common losses, to pay the expenses of management.
and to afford such a profit as might have been drawn from an equal
capital employed in any common trade. The person who pays no
more than this evidently pays no more than the real value of the risk,
or the lowest price at which he can reasonably expect to insure it.
But, though many people have made a little money by insurance, very
few have made a great fortune : and from this coz_sideration alone it
seems evident enough that the ordinary balance of profit and loss is
not more advantageous in this than in other common trades, by which
so many people make fortunes. Moderate, however, as the premium
of insurance commonly is, many people despise the risk too much to
care to pay it. Taking the whole kingdom at an average, nineteen
houses in twenty, or rather perhaps ninety-nine in a hundred, are
not insured from fire. Sea risk is more alarming to the greater part
of people, and the proportion of ships insured to those not insured is
much greater. ]_iany sail, however, at all seasons, and even in time
of war, without any insm'ance. This may sometimes, perhaps, be
done without any imprudence. When a great company, or even a
great merchant, has twenty or thirty ships at sea, they may, as it
were, insure one another. The premium saved upon them all tony
more than compensate such losses as they are likely to meet with
in the common course of chalices. The neglect of insurance upon
shipping, however, in the same manner as upon houses, is, in most
cases, the effect of no such nice calculation, but of mere thoughtless
rashness and presumptuous contempt of the ri_k. The ordinary rate
of profit always rises, more or less, with the risk. It does not, how-
ever, seem to rise in proportmn to it, or so as to compensate it com-
pletely. Bankruptcies are most frequent in the most hazardous
trades. The most hazardous of all trades, that of a smuggler,
though, when the adventure succeeds, it is likewise the most profit-
able, is the infallible road to bankruptcy. The presumptuous hope
of success seems to act here as upon all other occasions, and to entice
so many adventurers into those hazardous trades, that their competi-
tion reduces their profit below what is sufficient to compensate the
risk. To compensate it completely, the common rcturns ought, o_r
212 WAGES IN DIFFERENT EMPLOYME_NT$.
aml above the ordinary profits of stock, not only to make up for all
occasional losses, but to afford a surplus profit to the adventurers of
the same nature with the profits of insurers. But if the common
returns were suMcient for all this, bankruptcies would not be more
frequent in these than in other trades." Book 1. el/. X.
Whether Adam Smith's conclusions be true or false, they certainly
do not fullow from his premises. Bankruptcies might be frequent in
a trade of extraordinary profit. We will suppose ten merchants each
to employ for a year a eapital of £10,000 in a remarkably safe trade,
and ten others to employ equal capitals for the same period in a
hazardous trade; and ten per cent. per annum to be the average rate
of profit in undertakings involving similar trouble. Tile capital of
_]00.t)00 en_o'aged in {he safe trade would, at the end of the year,
be raised to £110,000, but be distributed in the same proportions as
before. If' the capital engaged in the hazardous trade were also, at
the end of the year, to amount to £110,000, it is clear that each
trade would have been equally profitable, although a different distri-
bution of the capital might have ruined some, and made the fortunes
of others, among the merchants engaged in it. Two might have lost,
and two others might have doubled, their whole property. If the capital
in the hazardous trade were found, at the end of the year, to have been
raised from £100,000 to £120,000, it is cle-_r that the hazardous
trade must have been twice as profita},le as the safe one, though the
whole of the advantage might have fallen to two or three or even to
one of the supposed ten merchants, leaving all the others to bank-
ruptcy.
Insurance was a still more unfortunate source of argument ; for all
the premises that it affords lead to a conclusion directly opposed to
Adam Smith's. Insurance is one of the safest of employments. If
its profits be remarkably moderate, their moderation can be accounted
for only by the extra competition which its safety invites. It affords,
therefore, at least one example in favour of the superior profit of
hazardous employments. Nor can it be said that the majority of
persons despise the risk too mueh to secure themselves against it by
paying a moderate premium. So much do they fear the risk that
they are willing to guard against it by paying a most immoderate
premium. The sum received by the insurance office must, as Adam
Smith has remarked, exceed the value of the risk by an amount
sufficient to pay the expenses of management, and afford ordinary
profit. The sum received bythe office on common insurances against
fire is Is. 6d. per £'100; of wi_ich at least 6d. must go to pay
expenses and profit, leaving Is. as the value of the risk. But a
duty is also paid to government by the insured of 3s. per £100;
so that the whole expense of insurance is 4s. 6d. per £100, or
nearly five times the value of the risk. And, even at this extra-
vagant rate, we believe tl,at of good houses not one in a hundred
WAGES IN DIFFERENT E_IPLOY3IFNTS. 21.3
lottery. Such were the shares which excited lhe stranffe fevers of
cupidity and speculation which marked the years of 1720 and ]$25.
Of the thousands who crowded to buy Chili and Peruvian_ and t_.io la
Plata, and Columbian, and Mexican shares, how man',- carl be sup-
posed not to have ascertained, but to have endeavoured to ascertain,
or even to have thought of ascertaininff, the probability of their
Compal_)"s success ? All they knew was that Real del _]:onte shares.
for which £.70 had been given, were selling for £1200: and they
bought a few shares in ether Companies, because, if the speculation
succeeded, they might get one thousand per cent., and if it failed they
had only lost one or two hundred pounds.
Generally speaking, however, those commercial adventures which
offer a large immediate advantage are more in the nature of ordinary
gambling than of a lottery. The possible loss often equals or
exceeds, and _eneralty bears a large proportion to, the possible gain.
The undue hopes and the undue fears, which we have described as
excited by the pro._pect of enormons gain and enormous loss, may now
be supposed to balance one another, and to leave room for the action
ef Adam Smith's principle, an absurd presmnption in our own good
fortune. If his theory be correct, if every man in tolerable health
and spirits have a tel_dency to miscalculate the chances in his own
favour, it must follow that those speculations, which offer a great
gain at the hazard of a great loss, invite so much competition as to
he. if not positively uni_ro_tahle, at least less advantageous than
ordinary employments. And we believe such to be the case. Mining
and stock-jobbing' are employments of capital which offer splendid
success at the hazard of ruinous failure. The former employment is
notorious not merely as affording less than average profits, but as
affording no aggregate balance of profit at all as productive in the
aggregate of toss. Knowledge, diligence, capital, all the materials of
success, are applied in Cornwall to one of the richest mineral districts
in the world, and yet it is supposed that the aggregate price of the
whole of the copper and tin annually raised in Cornwall is not equal
to the whole of the expense of raising it. A few capitalists, however,
make large fortunes, and their success draws on the rest, generally to
loss_ often to ruin.
Even if speculation in the funds were attended by no expense, it is
mathematically certain that it could in the aggregate afford no profit,
as what is gained by one must be lost by another. But it is carried
on at a very great expense. Every transfer costs a commission of
:2s. 6d. for every £.100 stock. A man who annually buys and
sells stock to the amount of £800,000, and that is far from a large
amount for any habitual speculator, must at an average pay for com-
mission £1001) a-year ; and that £1000 exactly represents the amount
of his annual loss, supposing him to speculate with average success.
On the whole, however, though we attribute something to men's
21_ WAGES IN DIFFERENT EMPLOYMENTS.
ANOTHER.
are considered the best workmen ; they use the same sort of tools
that the cotton-machine makers use ; but they are brought up to no
employment but making those clock and watch tools and movements.
When those men come to be employed in making cotton machines, we
find that they have almost as much to learn as if they had never
learnt any working in metal at all. We have found them quite
insufficient to do any ordinary filing and turning." cz
Garnier, in the amusing notes to his translation of Adam Smith,
contrasts the comfort of the lower orders in France with the pauper-
ism of England, and ascribes the difference which he discovers to
artificial restraints on the circulation of labour in England, and the
absence of such restraints in France. " Under a government." he
observes. "which does not interfere with the direction of industry,
it is impossible that a man in health and strength can be without
employment, unless his vices make employment intolerable to him.
Let the workman be allowed to choose the market for his labour, and
you may be sure that he will find one, and more and more certainly
in proportion to the wealth of the Country. The complaint of wan_
of work is the threadbare excuse of the idler who prefers relief to
wages. If he were to search for it, lie would find it as well as his
companions. In France, though our population is one-third more
numerous than that of England, amt the fund for the support of
labour much smaller, the labouring classes are free from want, or
even discomfort." *_
There can be no doubt that we have among our institutions and
our habits much that fetters and misdirects the industry of our
labourers; and that these causes frequently occasion, and always
prolong, the want of eml, loyment to which large portions of our
labourers are frequently exposed. We believe, too, that from many
of these causes France is comparatively free. The monopolies pos-
sessed by towns and by incorporated bodies of artificers, with their
oppressive bye-laws and duties, were swept away by the Revolution.
Much, however, that is productive of evils similar in kind, still
remains. Not long ago the number of butchers in Paris was, by an
ordonnance of police, restricted to four hundred. The most important
of all employments, that of affording education, is a government
monopoly; and the commercial code of France is even worse than
our own. If, therefore, the labouring classes of France neve2: suffer
from want of employment, they do not owe their immunity to a com-
plete, or even a very considerable, freedom from interference. If
their employment be actually more constant than that of our labouring
classes, we believe that they owe that constancy principally to the
inferior extent of their manufactures, and, what is both the cause and
the effect of that inferiority, to a much less subdivision of labour.
Less than one-third of the population of England, and more than two-
thirds of the population of France, are employed in the cultivation of
the soil. We are inclined to think that, notwithstanding this dispro-
portion, the English labouring classes are better fed than the French.
But there is no comparison between their respective enjoyment of
clothing and other manufactures. The greater par_ of the coarser
manufactures are both cheaper and better in England; while the
wages in France, both of manufacturing and agricultural labourers,
are about half what they are with us. " A peasant suffering severely
from rheumatism," says M. Say. (Co_rs C,_qdet, Tome I. p. 46,)
" asked my advice. I l:ecommen_lcd to him a flannel waistcoat next the
skin. He did not kn_w that there was such a thing as flannel. I told
him then to wear under his shirt a cloth waistcoat turned inside-out.
ttow, he asked, am I to get cloth to wear under my shirt, when I have
never been able to afford to wear it above ! And yet he was no worse
off than his neighbours."
The French labourer, being employed in nmre capacities than the
Englishman, has more trades to turn to, and for that very reason is
less efficient at any one. The Russian is probably more seldom out
of employ than the Frenchman, and the Tartar less f_equently than
either. But few principles are more clearly established than that,
ccpteris paribus, the productiveness of labour is in proportion to its
subdivision, and that, c,,tcris p_rib_ta, in proportion to that subdivision
must be the occasional suffering from want of employment. A savage
may be compared to one of his own instruments, to his club, or his
adze, clumsy and inefficient, but vet complete in itself. A civilized
artificer is like a single wheel or_ roller, which, when combined with
many thousand others in an elaborate piece of machinery, contributes
to effects which seem beyond human force and ingenuity, but, alone,
is almost utterly useless.
The difficulty in transferring _natcrial capital from one employment
to another depends principally on the degree in which it has been
manufactured, mid on the change to be made in the disposition of its
parts. The destination of raw material can, in general, be changed
with little inconvenience. The stones that have been collected for a
bridge may easily be employed for a house. :But if they have been
formed into a house, or a bridge, the value of the materials would
scarcely pay the expense of removing them. Those costly instru-
ments which form the principal part of i_xed capital can scarcely ever be
applied in their original state to any but their original purposes. They
are employed, therefore, in the same way, long after they have ceased
to afford average profit on the expense of their construction, because a
still greater loss would be incurred by attempting to use them in a
different manner. It would be a bad speculation to erect a steam-engine
at the cost of £20,000, which should return an annual profit of only
,/_100, but it would be a still worse one to sell it as old iron for £500.
_20 TRA_NSFEROF LABOUR AND CAPITAL
COUNTRY TO A-NOTHER.
The obstacles which exist, even within the same neighbourhood and
the same Country, to the transfer of labour and capital from one
employment to another, are of course aggravated, when not only the
occupation but the neighbourhood or the Country is to be changed.
Adam Smith states the common price of labour in London and its
neighbourhood to have been, when he wrote, ls. 6d. a-day, and the
usual price in the Lowlands of Scotland to have been 8d. "Such a
difference of prices," he adds, " which it seems is not always sufficient
to transport a man from one parish to another, would necessarily
occasion so great a transportation of the most bulky commodities, not
only from one parish to another but from one end of the kingdom,
Mmost from one end of the world, to another, as would soon reduce
them more nearly to a level. After all that has been said of the levity
FROM ONE COUNTRYTO ANOTftER. °21
centuries of peace made the Britons an easy prey to the Saxons, and
the Saxons to the Danes. Under such circumstances the permanent
improvement of the human race seemed almost hopeless. And if
gunpowder had not been brought into use just at the time when those
military virtues which belong to semi-barbarism were decaying, it
appears probable that another irruption of barbarians might have
brought back another middle age, in which :Europe might have lost
all that she gained between the XIIth and the XVth Centuries.
Resembling in kiml these migratory invasions, but very different
from them in effect, have been those emigrations on a smaller scale,
to which we give the name of COI,O_IZATIOX; in which a portion of a
comparatively civilized nation have gone out. with their knowledge
and weahh, their material, and moral, and intellectual capital, and
settled in an unoccupied or thinly peopled district. It is a remarkable
and a most unhappy circumstance that, notwithstanding the progress
of political knowledge, the true principles of Colonization have been
less and less understood, or, if uuderstood, less and less acted on, as
civilization has advanced. The earliest Colonies with wh;.ch we are
acquainted, those founded by the Phtenieians and the Greeks, seem
to have been founded fur the benefit of the Colonists. They were
allowed to appoint their own governors, to direct their own industry,
and to manage their own concerns : and they relied on themselves for
their defence. They were children, but emancipated children; and
their prog'ress was iu proportion to their independence. The Phoe-
nician Colonies in Africa and Syria, and the Grecian Colonies in Italy,
Thrace, Sicily, and Asia, seem quickly to have risen to an equality
with, or to have surpassed, their Mother Countries ; to have obtained,
in fact, all the weahh and power _vhich their extent of territory, and
the religion and knowledge of the times, made it possible to acquire.
The t_oman Colonies scarcely deserve that name. ]'lacy were generally
formed by grants of the lands, the capital, and the persons of conquered
Tribes, almost as civilized as their conquerors, to the armies or to the
populace of Rome, as a reward for services in foreign or civil war,
or for sedition and riot in the Ibrum. It may be a question whether
they accelerated or retarded the improvement of the world.
The Colonies of modern Europe have been established partly for the
benefit of the Colonists, and partly, as it was supposed, for that of the
parent state. The latter has, in general, contributed a part of the
expense of outfit, and almost all the expense of protection against
foreign aggression. She has also, in general, given to her Colonies a
monopoly, or something approaching to a monopoly of her market.
On the other hand, she has, in general, required her Colonies to give
to her own productions a much stricter monopoly. She has, in general,
required her Colonies to receive European productions solely from the
Mother Country, and to export only to the Mother Country colonial
productions. She has, in general, appointed the principal officers,
224 TRANSFER OF LABOURAND CAPITAL
and, until lately, those of almost all her islands, into two classes only,
the oppressors and the oppressed.
The transfer of Capital from one Country to another is subject to
less difficulty. When the exchange is at par between any two Coun-
tries, Capital can be transmitted m the shape of money without any
expense. And as the occasional loss which occurs when the exchange
is against the Country to which it is to be exported is compensated by
the occasional gain when it is in favour of that Country, it may fairly
be said that monied Capital is transferred from Country to Country
without expense• The chief obstacle is the unwillingness of Capitalists
either to trust their Capital out of their own superintendence, or to
encounter a change of _overnment habits, climate, and language, by
accompanying it. Difference of"lan_uazo, however, is felt as a slight
objection by educated men. Nor is difference of government of great
importance to those who propose only a transitory residence. The
difference indeed is ofteu considered an advantage. During the late
war, London was filled by foreign Capitahsts, whose principal motive
was to escape the tyranny of Nap.leon. Differences of habits and
climate are more mi_terial, especially the latter; but even those do
not seem to counterbalance a great i_,creaso of profit. There is
scarcely a port in the civilized world in which a considerable part of
the mercantile class does n,t ct,_,s_st t_f the natives of Great Britain.
The inequality in the rate of profit throughout the civilized world is,
therefore, much less than the inequality of wages. And as the
general progiess of in,pr,,_,m_,nt tet_ds more and more to equalize the
advantages possessed h_ d'ff_,'<,,, ,_',mntries in government and habits.
and even m salubrity oI' cb ............. _,_isting inequalities of profits are
likely to dhninish.
INDEX.
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